Tuesday, February 16, 2010

Efforts to stave off the Housing Bubble


The Honorable Finance Minister made a statement this morning to help what is perceived by some to be a housing bubble or the potential of an overinflated real estate market in the Toronto GTA that includes Mississauga and Oakville. They [[Gov of Canada] made modest changes to the guidelines the government issues to banks.


Summary

New Rules to Come into Force April 19th, 2010

Federal Finance Minister Jim Flaherty announced changes to mortgage insurance rules this morning, which are set to come into force on April 19th, 2010.

This means the government will adjust the rules for government-backed insured mortgages as follows:

Requires that all borrowers meet the standards for a five-year fixed-rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future.

Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90% from 95% of the value of their homes. This will help ensure home ownership is a more effective way to save.

Require a minimum down payment of 20% for government-backed mortgage insurance on non-owner-occupied properties.

There were no changes to down payment requirements or length of amortizations for owner-occupied residences.

[http://www.fin.gc.ca/n10/10-011-eng.asp] Click here for additional details on the changes.

Lets review;

Qualification has always been based on the five year fixed rate and in some cases the average of the five year and three years rates (Source RBC) No changes were made to the 5% down program and the banks still have cash back on closing mortgages. Amortizations did not change.

Non Owner occupied was a minimum of 15% down has now moved to be 20% down.

New conference tid bit Two thirds of Canadians own their own home.

So if you are new to Canada and would like a mortgage it is possible with 5% down and your landed documentation. Give us a call. I was very flattered to have the CBC call for an interview about how I felt these changes would effect the real estate market but in reality the changes are very minor. There was no headline for me.

2 comments:

Patrick said...

Real very good real estate blog I have ever seen. Good going, Keep it up

stuart said...

Very good summary of the new changes to the mortgage rules. This information is especially important for first time buyers who are thinking about entering into the Canadian real estate markets. For example, buyers who were thinking about delaying a purchase might want to make their move before the regulations come into effect.