Flaherty Announces New Mortgage Rules

Yesterday, Mr. Flaherty, Finance Minister,  made some aggressive changes to the mortgage rules in an attempt to slow down the rate that people are borrowing on home equity and to slow down the real estate market.
 

Here is a summary of the changes:

1) Amortization reduced from 30 down to 25 years on government backed mortgages (i.e. insured mortgages)
2) Max Loan To Value for Refinancing 80% of your home's market value
3) No CMHC backing for Properties over $1M (client must put down 20%)
4) Gross Debt Service ratio increased to 39% Total Debt Service ratio remains at 44% 

Please note as a repercussion of this announcement today the banks will start to implement the new rules over the next couple of weeks to meet with the July 9th deadline. Mortgages that have already been approved and are in the process of being funded will not be affected by these changes however any future transactions will have to be qualified under the new rules.

The question is: What does this mean for the average Canadian? The government believes that this will help halt an ever increasing housing market and will stop Canadians from using their homes as ATMs to pull cash out of equity.

It remains to be seen if the banks will continue to offer 30 and 35 year amortizations on non government backed mortgages. The government believes that only 5% of Canadians will be affected by these new rules.We did have some good news today as well with respect to these changes. Canadians will still be able to secure a home with only a 5% down payment as well as the increase in the GDS ratio will allow more room for certain families to qualify for homes.

As always I am available to answer all your questions please feel free to contact me. Have a good long weekend everyone.

Habitat for Humanity Montreal needs our help

Hey Everyone, from time to time I help out at Habitat for Humanity Montreal. They do some amazing work here in Quebec by building home for those less fortunate. Habitat Quebec has a Montreal-based retail hardware store, called the ReStore where sales proceeds help fund their builds. The products that are sold in the store are donated by suppliers. I'm on the hunt to help find more suppliers that can donate overstock products or renovation materials. Also, on a weekly basis Habitat rents a truck to pick up donated products. The monthly rental costs are incredible. My second mission is to help find a 19 foot truck that can be donated or loaned on a "long-term" basis. If anyone can help me out that would be incredible and would make a huge impact for Habitat.

Thanks. Have a good rest of the week.

Mortgage Summer Refresh & HELOC Changes

Yes I know I’ve been bad lately with blogging. Believe me I’m not saying that mortgage news has been slow rather the opposite. Lots on the go and there is talk of more Government changes related to mortgages and HELOCs (aka home lines of credit). Presently, if you wanted to buy or refinance your mortgage and home of credit can be combined up to 80% LTV (loan to value). In other words, you can receive a combination of mortgage and line of credit up to 80% of the market value of your home. Hence the majority of that 80% on a home mortgage could heavily consist of a home line of credit. In an effort to lower Canadian debt the Government is implementing new mortgage rules. It appears we will still be able to attain the 80% LTV financing, through max 65% heloc and 15% mortgage. Interest only payments and no amortization schedule will remain.

Frankly, I’ve never been a fan of helocs. Taking on a home line of credit needs to be calculated and the rationale needs to make sense (ideally short term). Helocs in my opinion are too easily accessible and once loaded they harm your credit score. It is unrealistic for most people to pay off a 100k loaded heloc unless you refinance your home, sell or win the lotto. So yes, I partially welcome new Government change. This change is supposed to take place later this year and we await the final Government guideline.

If you have any mortgage questions let me know.