Canada Tightens Mortgage Rules

[Finner]

Didn't find this topic anywhere, and this could have gone in the "Calgary Real Estate" thread, but i thought it warrants its own discussion.

Flaherty announced that he was moving the maximum amortization period to 30 years from 35 years and lowering the refinancing limit to 85% of a home's value from 90%. As well, he said the government was withdrawing insurance on home equity lines of credit.

From : http://online.wsj.com/article/BT-CO-...17-706559.html

Probably a good move, but the government went 0 down and 40 year amort so the average canadian could afford a house, but all it did was push up prices. Now as they tighten, anyone who entered the market in 06/07/08/09 due to the new rules is going to suffer as home prices drop as it makes it tougher for new/young buyers to qualify. I see homes in the 200-400k suffering in price as a direct result. All the people who could earlier qualify for say 300k houses can now only buy 270k houses.

[IliketoPuck]

But this helps those of us who are waiting to buy houses?

If I am following this correctly, house prices will drop, allowing me to pick up a nicer establishment for relatively less than someone would have paid in the last 5 years?

With the shorter term, it would also seem to encourage putting a larger down payment on a house at the beginning, which also lessens the risk of default over the term of the mortgage.

[scotty2hotty]

When does this go in to effect?

As far as prices go, I'd be surprised to see them drop. Level off ....yes ....

[Pacem]

Originally Posted by scotty2hotty

When does this go in to effect?

As far as prices go, I'd be surprised to see them drop. Level off ....yes ....

March 18th IIRC.

I just started house hunting (first time buyer) and seen this announced today.

I've been actively watching housing prices for the last year. There has been a recent dip in asking prices for places in the area we are looking at. If there is speculation of an even further dip....

I'm curious as to what effect this will have on housing prices.

[fredr123]

I've still yet to see a good answer for people who got one of the now unavailable mortgage products (e.g., zero down, 40 year amort) when it comes time to renew in the next year or two.

Do these people have to come up with the minimum downpayment now, which may be more difficult than ever if their house declined in value during the recession? Are they going to see large increases in their monthly payments as the amortization period is reduced? Are they in danger of no longer being able to afford their home if they can't meet these new requirements?

[Frequitude]

So should I try to sell my rental property before March 18?!?

[Young-Sneezy]

in related news, the United States decided to lower mortgage rates to 0.000000004% on a 1,000 year mortgage to encourage home ownership and spending.



THAT'LL MOVE THE CHAINS!

[Slava]

Originally Posted by fredr123

I've still yet to see a good answer for people who got one of the now unavailable mortgage products (e.g., zero down, 40 year amort) when it comes time to renew in the next year or two.

Do these people have to come up with the minimum downpayment now, which may be more difficult than ever if their house declined in value during the recession? Are they going to see large increases in their monthly payments as the amortization period is reduced? Are they in danger of no longer being able to afford their home if they can't meet these new requirements?

I think that your second paragraph is the answer there....they are going to have to refinance, and the new rules will mean that they will be forced into a new mortgage. The best thing they could do (theoretically) is get something arranged before March 18th....at least that is my guess?

[Finner]

Wait what? If you've already signed into a 40 or 35 years you don't have to refinance...you are grandfathered in. You'll just renew as usual as if you had a 25 year mortgage originally, you just won't be able to refinance in the future to the same level.

Right now i renew mortgages that have 37 year amorts left; Clients don't have to refinance.

[amorak]

That piques my interest - Do people with 35 year mortgages have to refinance then? Or do they get grandfathered in? If they don't, that's going to essentially bankrupt some people?

[bizaro86]

You can renew your existing mortgage, but you can't refinance.

[amorak]

Originally Posted by bizaro86

You can renew your existing mortgage, but you can't refinance.

Sorry - what's the difference? Would that mean someone had to stay with the same bank, they can't port the mortgage to a different broker or whatever that has better rates? Seems to penalize people?

Or does that mean you can't take a 35 year mortgage and refinance it to 25 years, and then try to take it back to 35 years some time later?

[amorak]

Originally Posted by fotze

So if someone has a 40 year mortgage, what happens when it comes up for renewal?

They had such thing as 40 year mortgages here?!?!?

You'd likely be retired and still be paying off your house, wow!!!

[troutman]

Inter-generational home loans:

http://www.independent.co.uk/money/m...or-413344.html

ex. Japan = up to 100 years

[macker]

Originally Posted by amorak

They had such thing as 40 year mortgages here?!?!?

You'd likely be retired and still be paying off your house, wow!!!

Not as bad as England....50 year mortgages IIRC...this was a few years back though and maybe they have also changed their system...30 years makes more sense as most people should be buying their first home by the time they are 25 and then they can hit "Freedom 55" without a mortgage. People will have to be more responsible with their money and expectations and the sense of entitlement may need to be reigned in. The debt ratios show that the current system wasn't working and it is likely a case of the government seeing a balloon slowly inflating to the point where they felt the need to reach over and pinch it before it became an even greater problem. First time home buyers should actually wait it out ...there will come a time when prices will be much lower than they are today.....Use "The Dent Method" to your advantage....These changes will just play into these trends....

[Finner]

Originally Posted by fotze

So if someone has a 40 year mortgage, what happens when it comes up for renewal?

Nothing, you renew your mortgage. However if you want to transfer your mortage to another institution you could only get a max 30 year mortgage from the new institution.

[albertGQ]

I wish they went to 10% down payment and 25 year amortization and no insurance on refinances over 80%

[Bring_Back_Shantz]

Originally Posted by amorak

Sorry - what's the difference? Would that mean someone had to stay with the same bank, they can't port the mortgage to a different broker or whatever that has better rates? Seems to penalize people?

Or does that mean you can't take a 35 year mortgage and refinance it to 25 years, and then try to take it back to 35 years some time later?

Wow, who every would have thought getting into a zero down 35 year mortgage could come back to bite someone in the ass?

[macker]

Originally Posted by Bring_Back_Shantz

Wow, who every would have thought getting into a zero down 35 year mortgage could come back to bite someone in the ass?

http://en.wikipedia.org/wiki/Michael_Burry

[MoneyGuy]

Originally Posted by amorak

They had such thing as 40 year mortgages here?!?!?

You'd likely be retired and still be paying off your house, wow!!!

Not really. My last 25-year mortgage was paid off in about 13 years. People do that all the time - the smart ones.