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Significant changes announced to the rules on mortgage lending...

The government continues to make changes to the rules for mortgage lending.  The restrictions are getting greater and greater each time.  These are being done to supposedly curb household debt and avoid future economic meltdowns like the one we saw in the US these past couple of years, BUT these restrictions (past, present, and inevitably more in the future) are going to make it increasingly more difficult.  If you are a first time home buyer or even someone on a budget looking to move up...now is the time.  I have added the government announcement below.

As a note...if you don't think any of these things will affect you or you are just 'playing the market' for now, think again.  I heard this before with the previous list of changes and I DID actually have buyers who lost out on their dreams because of how the new restrictions tightened everything up.  Don't miss out on YOUR dream.  This is serious stuff happening!


(taken from http://www.fin.gc.ca/n11/11-003-eng.asp)


The Harper Government Takes Prudent Action to Support the Long-Term Stability of Canada’s Housing Market

Related Document:

The Honourable Jim Flaherty, Minister of Finance, and the Honourable Christian Paradis, Minister of Natural Resources, today announced prudent adjustments to the rules for government-backed insured mortgages to support the long-term stability of Canada’s housing market and support hard-working Canadian families saving through home ownership.

“Canada’s well-regulated housing sector has been an important strength that allowed us to avoid the mistakes of other countries and helped protect us from the worst of the recent global recession,” said Minister Flaherty. “The prudent measures announced today build on that advantage by encouraging hard-working Canadian families to save by investing in their homes and future.”

“The economy continues to be our Government’s top priority,” continued Minister Paradis. “Our Government will continue to take the necessary actions to ensure stability and economic certainty in Canada’s housing market.”

The new measures:

  • Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent. This will significantly reduce the total interest payments Canadian families make on their mortgages, allow Canadian families to build up equity in their homes more quickly, and help Canadians pay off their mortgages before they retire.
  • Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes. This will promote saving through home ownership and limit the repackaging of consumer debt into mortgages guaranteed by taxpayers.
  • Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs. This will ensure that risks associated with consumer debt products used to borrow funds unrelated to house purchases are managed by the financial institutions and not borne by taxpayers.

Our Government’s ongoing monitoring and sound underlying supervisory regime, along with the traditionally cautious approach taken by Canadian financial institutions to mortgage lending, have allowed Canada to maintain strong and secure housing and mortgage markets.

The adjustments to the mortgage insurance guarantee framework will come into force on March 18, 2011. The withdrawal of government insurance backing on lines of credit secured by homes will come into force on April 18, 2011.





Published Monday, January 17, 2011 1:37 PM by Jennifer Jones


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