What can we expect from Mortgage Changes
New Mortgage changes are expected for this year just in time for the warmer Calgary real estate market in the spring. All changes will be expected to be implemented by April 2011 while some take effect in March 2011.
- The government will no longer insure credit lines against your home. Home credit lines will have to be a conventional product now and loan to value cannot exceed 80% of the property value.
- Amortization changes to the length of mortgage from 35 years max to 30 years max for insured mortgages. (conventional mortgages could still see 35 year and 40 year amortizations)
-Refinancing changes from 90% loan to value down to 85%
Making these changes will impact the ability for homeowners borrowing ability for sure and will force some homeowners to have to look at other options other than a refinance to handle their financial portfolios.
For some buyers the shortened high ratio amortization will affect the affordability of what type of home or property they will be able to buy and in some cases might take some of would be first time home buyers out of the market entirely. Changing the amortization length of a mortgage from 35 to 30 years could add $100 to $150 to your monthly payment and in some cases limit your affordability. If you are wanting to purchase a home and have a 35 year amortization on your mortgage you must take possession no later than March 17, 2010 any later will result in the shorter amortization period.
There is a possibility that these changes implemented in spring may very well affect our Calgary real estate market similarly to last years 2010 market where we saw a lot of people jump into the Calgary real estate market in the spring to beat the 2010 mortgaging changes. This impacted the 2nd half of our Calgary real estate market significantly because it took buyers that would have bought later in the year and made them beat the changes before they were implemented in spring of 2010 and bought early.
Changes to the minimum down payment increase from 5% seem to be on the back burner for now, but could be in sight for the future. Jim Flaherty ( Finance Minister of Canada) has discussed changing the minimum down payment from 5% to 7% or 8%. Canadians have a hard time saving for their first home when rent costs and the cost of living is high. Making an increase to the minimum down payment will have huge consequences for many first time home buyers and send them back to saving for months to additional years before home ownership will be in sight. I am pleased to see that this is currently off the table for the time being.
Flaherty said the changes are designed to prevent the kind of housing bubbles that developed in other countries, most notably in the United States, where the collapse of the sub-prime mortgage market triggered the global financial crisis.
The main reason we're taking the action is for the longer term, that we avoid even the beginning of the development of the kinds of issues in some other countries that have been very damaging to families, the minister told reporters after unveiling the mortgage changes.
Flaherty said the decision was based on the long-term goal of protecting household finances and the broader economy, rather than on any particular data on the housing market.