No more 30 Year Amortizations in Canada

[ranchlandsselling]

Originally Posted by tvp2003

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.

Yeah, if it does something, you'd think it'd be mostly to the ones you mentioned. Anything higher and those people can generally afford what they're buying.

I'm thinking my current home I already paid too much for 5 years ago is likely going to be worth even less. That said, maybe I'll be able to rent it out for a bit more

[Red]

Stole it from another site. Hope the math is correct. Based on 3.09% rate.

$500,000 -> $444,400
$400,000 –> $355,500
$300,000 –> $266,600

Wonder how much of a change with the supposed higher interest rates. Say 5%?

[Bill Bumface]

So everyone who bought during the 30/35/40 year mortgage period just got royally $*%&ed.

Good work government.

[core_upt]

Originally Posted by hulkrogan

So everyone who bought during the 30/35/40 year mortgage period just got royally $*%&ed.

Good work government.

AFAIK, once you have a mortgage in place, so long as the mortgage amount doesn't change, he amortization period won't change when you renew your terms. You may have to requalify, but if you had a 30+ before, you are able to keep it moving forward.

Correct me if I'm wrong.

[chemgear]

Originally Posted by ranchlandsselling

July 9th - 18 days from now rules change.

Hmmm, that seems faster than normal? Not 60 days eh?

[TheGrimm]

Originally Posted by hulkrogan

So everyone who bought during the 30/35/40 year mortgage period just got royally $*%&ed.

Good work government.

I don't get why anyone would want to do a 30/35/40 year mortgage in the first place. If you need to stretch yourself THAT much to get approval or feel comfortable with your monthly payments you should simply be buying a lower cost home or condo etc.

I really don't think this will impact the market a ton, if anything it will hurt the mini mansion buyers with mid-income levels. All these $750-900's 3000 sq foot homes on the edge of the city will be a harder sell. They will be the first to get hit if there is a "correction" anyway.

[Red]

Originally Posted by chemgear

Hmmm, that seems faster than normal? Not 60 days eh?

This will be interesting to watch.

Last year when they announced the changes early we saw a spike in activity. Now with the slowdown eveident already (Van and Tor) things may be different. Or maybe we will see more bidding wars before this takes effect.

[Rubicant]

Originally Posted by hulkrogan

So everyone who bought during the 30/35/40 year mortgage period just got royally $*%&ed.

Good work government.

Unfortunately that period of time likely allowed a lot of buyers into the housing market that couldn't have afforded the homes they purchased on a 25 year amortization. I'm going to guess that housing prices were higher than they would have been due to that increased demand.

So I completely agree with you. I bought on a 25 year amortization but probably paid more than I would have if the 30 - 40 year amortizations hadn't existed.

[Lt.Spears]

Originally Posted by TheGrimm

I don't get why anyone would want to do a 30/35/40 year mortgage in the first place. If you need to stretch yourself THAT much to get approval or feel comfortable with your monthly payments you should simply be buying a lower cost home or condo etc.

I really don't think this will impact the market a ton, if anything it will hurt the mini mansion buyers with mid-income levels. All these $750-900's 3000 sq foot homes on the edge of the city will be a harder sell. They will be the first to get hit if there is a "correction" anyway.

Goes along with our societies sense of entitlement.

[rayne008]

Originally Posted by hulkrogan

So everyone who bought during the 30/35/40 year mortgage period just got royally $*%&ed.

Good work government.

How is this f'in anyone with an existing mortgage?

- It won't change anything at your renewal
- I doubt it will seriously affect house prices
- If your worried about upgrading your house with a longer ammort,
you're probably buying too much house any ways, which is what they are
trying to prevent...

[Art Vandelay]

I have a 35yr. I have 1.5 yrs left on my current term. Through some prepayments I have my amortization down to 30 yrs as of now. I did not need CMHC insurance when I signed up for the mortgage as my down payment was like 30%.

When it comes to refinancing, will I need to go with a 25yr amortization or do banks still offer more than 25yrs on non-insured mortgages?

[ranchlandsselling]

Originally Posted by hulkrogan

So everyone who bought during the 30/35/40 year mortgage period just got royally $*%&ed.

Good work government.

Yup - but the government is "saving Canadians thousands"

Originally Posted by TheGrimm

I don't get why anyone would want to do a 30/35/40 year mortgage in the first place. If you need to stretch yourself THAT much to get approval or feel comfortable with your monthly payments you should simply be buying a lower cost home or condo etc.

Why? What if you wanted to buy something and were expecting a substantial increase in pay. I bought when I could just affoard it and now it's pretty easy. Since I purchased almost 5 years ago my pay has increased 66% and I make additional earning on the side. If prices decline it impacts everyone (how much or if they care is another matter) who currently owns a house.

Originally Posted by Rubicant

Unfortunately that period of time likely allowed a lot of buyers into the housing market that couldn't have afforded the homes they purchased on a 25 year amortization. I'm going to guess that housing prices were higher than they would have been due to that increased demand.

So I completely agree with you. I bought on a 25 year amortization but probably paid more than I would have if the 30 - 40 year amortizations hadn't existed.

Yup, even thouse who went with shorter amortizations at the time could have a resulting negative impact on what they paid.

[linecook]

Originally Posted by TheGrimm

I don't get why anyone would want to do a 30/35/40 year mortgage in the first place. If you need to stretch yourself THAT much to get approval or feel comfortable with your monthly payments you should simply be buying a lower cost home or condo etc.

I really don't think this will impact the market a ton, if anything it will hurt the mini mansion buyers with mid-income levels. All these $750-900's 3000 sq foot homes on the edge of the city will be a harder sell. They will be the first to get hit if there is a "correction" anyway.

I will give you one example why. Person buys a house with his girlfriend before the boom, prices skyrocket, she cheats on him, he ends the relationship, he wants to keep the house and has to buy her out. He amortizes over 35 years which allows him to keep the house, he meets a great girl, gets married has kid, has a 35 amoritization but only has 23 years left on mortgage now. Worked out great for him!

[rayne008]

Originally Posted by Art Vandelay

I have a 35yr. I have 1.5 yrs left on my current term. Through some prepayments I have my amortization down to 30 yrs as of now. I did not need CMHC insurance when I signed up for the mortgage as my down payment was like 30%.

When it comes to refinancing, will I need to go with a 25yr amortization or do banks still offer more than 25yrs on non-insured mortgages?

My understanding from renewing in June is that the renewals are always based on the original mortgage. I've prepaid a lot in mine, but I have the choice to go back to my original 35 year term if the need arises. This was with TD.

[The Yen Man]

Originally Posted by TheGrimm

I don't get why anyone would want to do a 30/35/40 year mortgage in the first place. If you need to stretch yourself THAT much to get approval or feel comfortable with your monthly payments you should simply be buying a lower cost home or condo etc.

It depends on the situation. I still think your mortgage is the cheapest way to borrow money, and if you're able to use that money to generate a higher return than the interest rate, then you come out ahead. I guess it depends on how risk adverse some people are.

[ah123]

Originally Posted by TheGrimm

I don't get why anyone would want to do a 30/35/40 year mortgage in the first place. If you need to stretch yourself THAT much to get approval or feel comfortable with your monthly payments you should simply be buying a lower cost home or condo etc.

Flexibility. You can choose a 30 year amortization and increase your payment and payment frequency. If you run into any sort of financial trouble in the future, you can change your payment amount to the minimum amount required (which would be lower on a 30 year am vs a 25 year am).

[Mike Oxlong]

Here's a breakdown of the rule changes and when they come into effect (July 9th as has been discussed)

Government of Canada’s announcement, regarding changes to Government Backed Insured Mortgages, effective July 9th 2012.

1) Amortization Period is REDUCED to 25 years for high ratio applications. Banks can continue to offer 30 year amortization on LTV’s 80% or less

2) Refinancing is REDUCED from 85% LTV to 80%

3) Limit GDS to 39% and TDS to 44%

4) Maximum Purchase Price for government backed mortgage insurance is $1 Million. Homes above $1 Million must have 20% downpayment

[bizaro86]

Originally Posted by Mike Oxlong

Here's a breakdown of the rule changes and when they come into effect (July 9th as has been discussed)

Government of Canada’s announcement, regarding changes to Government Backed Insured Mortgages, effective July 9th 2012.

1) Amortization Period is REDUCED to 25 years for high ratio applications. Banks can continue to offer 30 year amortization on LTV’s 80% or less

2) Refinancing is REDUCED from 85% LTV to 80%

3) Limit GDS to 39% and TDS to 44%

4) Maximum Purchase Price for government backed mortgage insurance is $1 Million. Homes above $1 Million must have 20% downpayment

Are they going to index that 1MM$?

[TheGrimm]

Originally Posted by linecook

I will give you one example why. Person buys a house with his girlfriend before the boom, prices skyrocket, she cheats on him, he ends the relationship, he wants to keep the house and has to buy her out. He amortizes over 35 years which allows him to keep the house, he meets a great girl, gets married has kid, has a 35 amoritization but only has 23 years left on mortgage now. Worked out great for him!

Hey, I think it's great that this CAN happen, I don't believe for a second that this is the norm. It doesn't for one second change the fact that people who drag out a 30-35 year mortgage are paying WAY more in interest just to appease their wants. It's fully within their rights to do so, I am not arguing this, the option was there at the time. I just think that there is too much of a "now" mentality with people today. I would rather not mortgage my future to enjoy a bigger home now.

Personal preference I guess.

[TheGrimm]

Originally Posted by ranchlandsselling

Why? What if you wanted to buy something and were expecting a substantial increase in pay. I bought when I could just affoard it and now it's pretty easy. Since I purchased almost 5 years ago my pay has increased 66% and I make additional earning on the side. If prices decline it impacts everyone (how much or if they care is another matter) who currently owns a house.

This is not a smart game plan most of the time. It's great that you got your raises and that you are comfortable, but what would happen if you weren't living in Alberta and your pay went the other way or you got layed off? I am just playing devils advocate, but why put yourself through the extra stress of it all when you could have simply bought the "dream" house down the road and had a larger downpayment having saved all that extra money?