Quote:
Originally Posted by Mike Oxlong
Once these changes come into effect October 15th there won't be ANY banks offering 40 year ammortizations. Many lenders have already stopped the 40 year ammortizations and are strictly working on the 35 year max as of now.
If you currently have a 40 year ammortization it will be grandfathered in and you will remain on 40 years however when it comes time to renew you are going to have to move to 35 year max.
As far as the situation in the US goes the ammortization period didn't have much to do with the crash. The crash was caused because lenders were loaning people money who had bad credit, poor income, and they give them 100% financing and sometimes up to 125% financing. They would offer them a teaser rate (discounted rate) for the initial start of the mortgage and when the discounted rate ended and rates went up on these people they had no way to make the payments.
That was the cause of the crash. Not 40 year ammortizations. I think especially in a city like Calgary 40 year ammortizations can really help especially first time homeowners get into a place. As they start earning more money they can always move it to 25 or 30 years as their situation improves. As long as they meet the credit, income and earning potential requirements they are no riskier than a 35 year ammortization.
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I suck at math and haven't run the numbers myself, but how much would the monthly payments of a typical say $350,000 mortgage amortized over 40 years differ when the homeowners are forced to move to a 35 year mortgage upon renewal? If these folks bought at the height of the boom here in Calgary and find themselves with only a modest (or gulp no) increase in the value of their home, are they going to be at risk for losing their home thanks to the recently announced changes?