No more 30 Year Amortizations in Canada

[Kavvy]

I am sure this post could go in many threads, but to someone in my postion in life.... this is huge

http://www.theglobeandmail.com/repor...rticle4358876/

[Fire]

I know the conservatives are the ones who increased the amortizations in he first place but at least they are fixing their mistakes. This will lower the prices of houses which will only be good news for first time buyers.

[Kavvy]

Originally Posted by Fire

I know the conservatives are the ones who increased the amortizations in he first place but at least they are fixing their mistakes. This will lower the prices of houses which will only be good news for first time buyers.

Which is me.... it would be nice to find a sweet spot between amortization rates, intreset rates and the decrease in housing prices... i.e. as intrest rates go up, I pay more, but housing prices may decrease - maybe by a lot

[DownhillGoat]

Originally Posted by fotze

Is this immediate starting tomorrow? What if someone has just bought or something?

If you've already got the mortgage, the original conditions/amortization period remains the same, as far as I know.

Also, wouldn't this only apply to mortgages with less than 20% down? I thought anything above that wasn't backed by CMHC. Or am I completely off base?

[chemgear]

^ 60 days?

[ranchlandsselling]

Knocks payments up about 13% based on the rates of various terms I'm seeing. Moving from 30 to 25 years means your payments increase by 13%.

Now you're putting 13% more to principle - so while it's more expensive it's actually saving you more money. But . . . If you're buying on the cusp which I'm sure some are are. It's going to make a difference.

[zarrell]

Might be good for those of us with property on the market right now. Get those people buying immediately before they cannot afford the payments?

[ranchlandsselling]

Originally Posted by zarrell

Might be good for those of us with property on the market right now. Get those people buying immediately before they cannot afford the payments?

Could be.

[chemgear]

^ if you can rope them in before it takes effect. If not . . .

[ranchlandsselling]

How long ago were the 30 year amortization introduced? Obviously awhile before the 35's.

[ranchlandsselling]

One interesting offshoot of this could be higher rental rates in the future. Depends some people might be pushed back to renting. Housing prices might come off a little but rents could also creep up.

[opendoor]

Originally Posted by ranchlandsselling

How long ago were the 30 year amortization introduced? Obviously awhile before the 35's.

They were all introduced by the CMHC in 2006 after the Conservative government came to power. From 2005 to 2006 it went from 25, to 30, then 35, and finally a 40 year max amortization. The CMHC also started to back 0% down mortgages starting that year.

http://www.canada.com/nationalpost/f...f318e2&k=20358

I think in the future we're really going to look back with disdain at what the government and the CMHC did starting that year.

[Winsor_Pilates]

Originally Posted by kunkstyle

Also, wouldn't this only apply to mortgages with less than 20% down? I thought anything above that wasn't backed by CMHC. Or am I completely off base?

Correct
It will have the biggest effect on first time buyers who are largely not putting down 20% and will now have to expect higher payments and lower approval ranges.

[ranchlandsselling]

Originally Posted by Winsor_Pilates

Correct
It will have the biggest effect on first time buyers who are largely not putting down 20% and will now have to expect higher payments and lower approval ranges.

But if it is going to have one effect it won't just stop with first time buyers. It'll trickle through the whole market. Those first time buyers are buying houses off the want to be second home buyers/upgraders.

[Winsor_Pilates]

Originally Posted by ranchlandsselling

But if it is going to have one effect it won't just stop with first time buyers. It'll trickle through the whole market. Those first time buyers are buying houses off the want to be second home buyers/upgraders.

I never said otherwise.
This same question came up when the 35 year was nixed, and a lot of people thought it would result in major price reductions.
I guess we'll see this time around...

[Sylvanfan]

Oh man, I have one of those evil 35 year mortgages...Will I get kicked out of my house when I have to renew and they find out I can't afford higher payments, and my house is worthless anyways because financial armageddon has taken full effect?

By the time I have to renew the maximum amortization will be down to 10 years. By than it should bring prices down.

[Deegee]

Some other changes introduce such as a maximum P/P for insured mortgages and GDS and TDS changes.

[ranchlandsselling]

Originally Posted by Winsor_Pilates

I never said otherwise.
This same question came up when the 35 year was nixed, and a lot of people thought it would result in major price reductions.
I guess we'll see this time around...

And I never said you didn't

The change is greater with each drop. I actually don't know how much it will change things. I thought about it all night and. . . I don't know. Those who were prepared to be house poor at a 35 and 30 year amortization maybe won't be able to buy as much house. How many people like that are needed to change the market? Is there that many people?

We'll see.

[tvp2003]

Originally Posted by ranchlandsselling

And I never said you didn't

The change is greater with each drop. I actually don't know how much it will change things. I thought about it all night and. . . I don't know. Those who were prepared to be house poor at a 35 and 30 year amortization maybe won't be able to buy as much house. How many people like that are needed to change the market? Is there that many people?

We'll see.

I'm thinking the biggest hit will be the $400-600k price point -- first/second time buyers that could extend that high under 30 years will have to scale it back in order to qualify. If you're in the sub-$300k market, the change will probably take out a few buyers but the actual difference in payments on a 30-year to a 25-year is probably a little easier to absorb.

[ranchlandsselling]

July 9th - 18 days from now rules change.