On July 9, the Department of Finance announced adjustments to the rules for government guaranteed mortgages aimed at protecting the strengthening the Canadian housing market. CMHC supports the new parameters and the government’s ongoing efforts to maintain a strong Canadian housing market.
Consistent with the government’s direction, CMHC will no longer be accepting mortgage insurance applications for 40-year amortizations or 100 per cent loan-to-value mortgages on or after October 15, 2008. Those mortgages with a 40-year amortization and the 100 per cent loan-to-value mortgages already insured by CMHC are not affected. CMHC mortgage insurance coverage on these mortgages is good for the entire life of the mortgage.
However, CMHC will continue to offer mortgage loan insurance for amortizations of up to 35 years and up to 95 per cent of the value of the property, and will continue to offer a wide range of innovative products that meet the needs of borrowers.
CMHC will also continue to offer CMHC Flex Down, which offers homebuyers the flexibility of purchasing a home using a wider range of sources for their down payment — including borrowed funds and lender cash-back incentives.
Residential Real Estate Sales. Listing-Buying, Renovating, Additions, Custom New Build.
Interesting news - and an intersting strategy! How do you think this will affect the local real estate market, esp. in the long run? I'm especially curious about US companies and citizens showing an interest in Canada: do you suppose it'll drive investors in, or drive them off? A Toronto real estate agent myself, I strive to look as far ahead into the future as I can, which I'm pretty sure you do as well. Thanks a bunch for the update Dave, I believe people will find info such as this particularly useful. Keep'em posts coming!
ReplyDeleteCheers,
Ellie
In the short run it will no doubt have a negative impact, in the long one positive. I did not run into too many clients who used the longer term. However of the ones that did opt for it I experienced how it was used by the right person and the wrong couple.
ReplyDeleteThe latter used the 40 year as a means to save their family from having to be displaced and renting. Their eyes lit up when I informed them of the 40 year mortgage and they scrambled thereafter to consolidate all their loans. Their home was obviously over appraised - possibly 40k over. I expressed my concern but ultimately it was worth the risk for them.
On the flip side the 40 year mortgage fit perfectly for another client who wanted to get out of renting could not afford the house at the 25 year amort, but felt very comfortable with 40 years. She had no intention of ever moving and did not anticipate ever really paying it off. For her it was logical, overpaying interest was a small price to pay for home ownership. The change will chip away at people like her who legitimately benefitted from it. In this respect the blanket move by the government will impact sales negatively.
Good question about foreign interest. I am not overly familiar with mortgages south of the border. A friend and client explained to me that their terms are 30years. I believe he meant that the rate is fixed for 30 years?