New Regulations passed from Canadian Government

Today Finance Minister Jim Flaherty has tightened up the mortgage guidelines for all Canadians that will take effect on March 18, 2011.

The changes that he has made are as follows:

• Reducing the maximum amortization period from 35 years to 30 years for government backed  insured mortgages with loan-to-value ratio higher than 80 percent.
• Lowering the maximum amount Canadians can borrow in refinancing their mortgages from 90 percent to 85 per cent of their homes value.
• Withdrawing government backed insurance on lines of credit secured by homes, such as home equity lines of credit.

The reason for these new/tighter guidelines is to help Canadians tackle growing household debt.  They want to prevent Canadians from taking on excessive debt.

Some forecasters are predicting housing prices will dip a bit over the next 12 months because of the changes to the amortization lengths. Buyers who would have opted to spread the cost out over 35 years will be forced instead to borrow less in order to keep their payments reasonable.

It will be interesting to see how much these changes will affect the real estate market over the next year. Personally and professionally I hope it’s not too much but only time will tell. 

If you have any questions about these changes please give me a call. I am always here to help.