ACTIVE
SOLD
Price
Filters
RSS

CBC – Thu, 21 Jun, 2012

 

Finance Minister Jim Flaherty has outlined new rules aimed at reining in a hot housing market and ensuring Canadians aren't taking on more debt than they can afford.

Flaherty laid out a series of changes to the rules that govern the Canada Mortgage and Housing Corporation, the Crown corporation that effectively oversees the housing market by insuring the vast majority of Canadian mortgages.

The most important new change is that the maximum amortization period has been reduced to 25 years, down from 30. The longer a mortgage is spread out, the lower the monthly mortgage payments are — but the more the borrower ends up paying overall over time.

The impact of the change is likely to be significant. It's about the same as a 0.9 percentage point increase on a typical mortgage, Bank of Montreal economist Robert Kavcic noted.

Indeed, the numbers add up. A $300,000 mortgage spread over 30 years at 4.0 per cent would cost $1,426 a month to pay back. That same mortgage amortized over only 25 years increases the monthly payment by $152 or 10 per cent to $1,578 a month.

Ultimately though, the higher monthly payment saves the borrower money in the long run. The total interest payments are $213,558.91 on the 30-year mortgage, but only $173,416.20 on the 25-year one.

The shortened amortization is also likely to affect a huge segment of the market, as about 40 per cent of all new mortgages were amortized over 30 years last year, the Canadian Association of Accredited Mortgage Professionals estimates.

Anyone who needed or wanted a 30-year mortgage before is going to have to qualify under tougher 25-year requirements now.

Ottawa has now moved three times to rein in the maximum mortgage term, since the CMHC briefly started insuring mortgages with 40-year terms in 2006. The limit was brought down to 35 years, then 30 and now the more traditional 25.

"The reductions to the maximum amortization period since 2008 would save a typical Canadian family with a $350,000 mortgage about $150,000 in borrowing costs over the life of that mortgage," Flaherty said.

"Our government has encouraged Canadians to borrow responsibly," Flaherty said. "Most Canadians have done so."

At 25 years, the maximum amortization period for CMHC-backed loans is now back to where it had historically been before the Harper government began raising the period after taking office in 2006.

Interim Liberal Leader Bob Rae made that very point in question period on Thursday, asking Prime Minister Stephen Harper if raising CMHC's limit to 40 years in the first place was a mistake.

"The government has altered rules a number of times and will continue to do so on a prudent and flexible manner depending on the circumstances," the prime minister replied.

Flaherty also outlined a few other measures Thursday.

The government has lowered the total amount that Canadians can withdraw when refinancing their homes to 80 per cent of the home's value, from 85 per cent.

"This will promote saving through home ownership and encourage homeowners to prudently manage borrowings against their homes," Flaherty said.

Flaherty also moved to cap the maximum gross debt service ratio at 39 per cent and the maximum total debt service ratio at 44 per cent in order to get CMHC insurance. Banks calculate the former by adding up mortgage payments and property taxes on a home loan, and dividing by the borrower's income. The latter adds in other debt payments such as lines of credit and credit cards to the top side of the ledger.

Although they both have obscure, technical names, they're both effectively just limits on how much debt a borrower is allowed to take on as a percentage of their overall income. That move, too, is aimed at making sure borrowers can't bite off more than they can chew.

The final change was to limit CMHC insurance to homes priced under $1 million. "Wealthy people can borrow whatever they want from banks, and they can work that out from banks," Flaherty said. "That is not my concern."

That effectively means that a homebuyer who wants to purchase a home for more than $1 million can't get insurance on it — which in turn means the buyer will have to come up with the 20 per cent down payment requirement in order to get an uninsured mortgage.

So under any circumstance, any new borrower wanting to buy a home of $1 million or more is going to have to put $200,000 down at a minimum. That's also likely to have a major impact on a comparatively small segment of the market.

"Although this could create some market dislocations in the just-under-$1-million segment, it's consistent with CMHC's recent efforts to focus its insurance business on encouraging owner-occupied purchases among average Canadians," BMO economist Michael Gregory noted.

All of the changes will be in effect as of July 9, 2012. In the interim, the action in hot Canadian housing markets is likely to get even hotter, experts say, as borrowers scramble to get in ahead of the more stringent rules.

"As we’ve observed around prior mortgage rule changes, some housing market activity will likely be pulled forward ahead of the implementation date," Kavcic noted.

But there's likely to be a subsequent pullback, too, he says. The last time Ottawa tinkered with CMHC rules, home sales fell by three per cent in the two months following the implementation date.

The Canadian Real Estate Association reacted coolly to the news on Thursday, calling it a "measured response" to rein in debt loads, but taking pains to note that the home resale market contributes $20 billion a year to Canada's economy and as such, is deserving of caution.

"Going forward, we would urge the government to consider the impact of further interventions in the market carefully," CREA said.

 

http://ca.news.yahoo.com/ottawa-caps-cmhc-mortgages-25-235532064.html

Read
Categories:   #CalgaryHomesforSale | #yycrealestate | 10 Lake Communities Calgary | 10 Reasons to Live in Seton Calgary | A Valuable Guide in Buying a New Home from a Builder | About Diane Richardson | Acreages for sale near Calgary | Acreages for sale Wheatland County | Acreages near Calgary | Acreages Southern Alberta | Affordable Calgary Real Estate | Airdire Homes for Sale | Airdrie Alberta Homes for Sale Under $500,000 | Airdrie Communities | Airdrie Homes for Sale | Airdrie Homes for Sale Under $500k | Airdrie Neighbourhoods | Airdrie top 10 | Alberta economy | Altadore_River Park, Calgary Real Estate | Apartment Condos | Arbour Lake, Calgary Real Estate | Auburn Bay Calgary | Auburn Bay Homes for Sale Calgary: Enjoy Lakeside Living | Auburn Bay, Calgary Real Estate | Bankview, Calgary Real Estate | Bearspaw Acreages for Sale | Bearspaw Real Estate | Beltline, Calgary Real Estate | Bowness, Calgary Real Estate | Brookfield | Browse MLS® Listings | Bungalows for Sale in Calgary | Buy Townhouse Calgary | Buying a home, Calgary | Buying a house in Calgary | Buying a house in Seton | Buying Property in Foothills County | Calgary | Calgary 3 Car Garage homes | Calgary Acreages | Calgary Bungalows | Calgary Communities | Calgary Condominiums | Calgary Condos | Calgary Detached Homes | Calgary First-Time Buyer's Guide | Calgary Half Duplex | Calgary Home | Calgary Home for Sale Cranston | Calgary Home Prices | Calgary Homeowner | Calgary Homeowner,Calgary Homes for sale | Calgary Homes | Calgary Homes for Sale | Calgary Homes for Sale SE | Calgary Homes for Sale Search by price | Calgary Homes Under $500K | Calgary House Prices | Calgary Houses | Calgary Houses for Sale | Calgary Housing market | calgary housing market forecast 2024 | Calgary Just Listed | Calgary Just Listed Homes | Calgary Lake Communities | Calgary Listings, | Calgary local housing market | Calgary Luxury Neighbourhoods | Calgary MLS Listings | Calgary neighborhoods | Calgary neighbourhoods | calgary new homes | Calgary New Listings | Calgary New Townhomes for sale | Calgary Newly Listed Real Estate | Calgary Open House | Calgary Property for Sale | Calgary property market | Calgary Real Estate | Calgary real estate guide | Calgary Real Estate Listings, | Calgary Real Estate Outlook | Calgary Realestate | Calgary Realtor | Calgary Rental Demand. | Calgary row houses | Calgary Schools | Calgary SE Homes for Sale | Calgary semi detached homes | Calgary Spring Real Estate Market | Calgary Stampede | Calgary Townhomes | Calgary Townhouses | Calgary Villas | Calgary Walkout Homes | Calgary Walkout houses for sale | Calgary's Finest Condos | Calgary's housing market | Calgary's Luxury Real Estate Market | Cedarbrae, Calgary Real Estate | Charming Towns Within Commuting Distance of Calgary | Chestermere | Choosing the right neighborhood in Calgary | Clearwater County | Comparing Rocky View and Foothills Municipal Districts | Comprehensive Guide to Buying a Condo | Contact me Diane Richardson | Copperfield, Calgary Real Estate | Cranston 3 bedroom homes | Cranston Bungalows for Sale | Cranston Calgary | Cranston Homes for Sale | Cranston Real Estate Info | Cranston, Calgary Real Estate | Deer Ridge, Calgary Real Estate | Detached Houses for sale Calgary | Dianerichardson.ca | Discover Your Perfect Home in Southeast Calgary | Doorbell Wireless | downsizing | Evanston, Calgary Real Estate | Exploring Acreages near Calgary | Exploring Foothills County | Exploring the Charm of Bungalows for Sale in Calgary | Exploring the Charm of Rural Foothills MD Acreages | Finding a home in Calgary | Finding Affordable Homes in Calgary | First-Time Home Buyer in Calgary | Foothills | Foothills County | Foothills County, Alberta | Foothills: Where Rustic Charm Meets Community Spirit | four new public schools opening this fall | General | Getting your home ready for sale' | Glamorgan, Calgary Real Estate | Guide to Buying a House in Calgary | guide to Calgary MLS® listing | Harvest Hills, Calgary Real Estate | Haysboro | Haysboro, Calgary Real Estate | Heritage Pointe | Hillhurst, Calgary Real Estate | Home Equity Through Downsizing | Home Gadgets | Home Improvements | Home Renovations | Homes for Sale Calgary | Homes for sale in Auburn Bay | Homes for Sale in Bearspaw | Homes for Sale in Calgary | Homes for Sale in Okotoks | Houses for sale in Legacy Calgary | Inglewood, Calgary Real Estate | Kincora, Calgary Real Estate | Kneehill County | Lake Communities Calgary | Lake Homes Calgary | Legacy Calgary Homes for sale | Legacy Homes for sale | Light bulbs Led | Living in Calgary | Living in Foothills County | Maple Ridge, Calgary Real Estate | McKenzie Lake, Calgary Real Estate | McKenzie Towne Homes for Sale | McKenzie Towne, Calgary Real Estate | Midnapore Community Information | Midnapore For Sale | Midnapore Homes for Sale | MLS® active listings for Calgary | Mountain View County | Mountain View County Homes | Mountain View County Real Estate | Moving to Calgary | MypadCalgary | Nest thermostat | New Brighton Homes for Sale | new calgary homes for sale | New Homes | New Homes in Cranston | New Mortgage Changes effective July 9th 2012 | New Townhomes Calgary | NW Calgary Overview | NW Calgary real estate | NW CALGARY: CONDOS, TOWNHOMES, AND HOUSES FOR SALE | Okotoks | Okotoks Homes for sale | Okotoks Living | Okotoks Population | Okotoks Real Estate | Okotoks, Okotoks Real Estate | purchasing a new Calgary home | Queensland, Calgary Real Estate | Richmond Hill, Calgary Real Estate | Rocky Ridge Ranch, Calgary Real Estate | Rocky View County | Rocky View: Where Urban and Rural Converge | Royal Oak, Calgary Real Estate | Rural Foothills County | Rural Rocky View MD, Rural Rocky View County Real Estate | SE Calgary Homes for Sale | SE Calgary Real Estate | Search by Neighbourhood | Selling my Calgary Home | Selling Your Calgary Home | Selling Your Calgary Home with Realtor Diane Richardson | Seton | Seton Homes for sale | Seton SE Calgary | Single Level Homes | South Calgary | South Calgary, Calgary Real Estate | south health campus | Southeast Calgary | Southeast Calgary real estate | Spring Clean | Springbank Hill | Strathmore homes for sale | Strathmore real estate | Strathmore, Strathmore Real Estate | Sundance, Calgary Real Estate | The Community of Walden Calgary | Thorncliffe, Calgary Real Estate | Top 10 Neighbourhoods in Chestermere | Top 10 Neighbourhoods in Okotoks | Top Calgary Realtor | Townhomes for sale in Calgary | Triple Car Garage Homes for Sale in Calgary | Tuscany, Calgary Real Estate | Upcoming Open Houses in Calgary this weekend | Valley Ridge, Calgary Real Estate | Victoria Park, Calgary Real Estate | Walden | Walkout Basement Homes Calgary | West Hillhurst, Calgary Real Estate | Whats my home worth? | Wheatland County | Wheatland County Homes for sale | Your Ultimate Guide to Buying a Home in Calgary
Data is supplied by Pillar 9™ MLS® System. Pillar 9™ is the owner of the copyright in its MLS®System. Data is deemed reliable but is not guaranteed accurate by Pillar 9™.
The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA. Used under license.