Mortgage Rules are getting tighter for Canadians yet again...

Mortgage and Lending with The Mortgage Centre

Hello Vancouver, as of April 19th 2010 we are getting tougher rules imposed yet again in a bid to prevent the US style housing melt down that besieged the US for the past few years. I guess it's good but we are already very conservative in Canada and have not experienced what happened in the US. I will try to summarize below. 

Canada's Finance Minister tightened rules for Canada's mortgage industry to ensure homebuyers can afford their homes when interest rates rise.

Under the changes for CMHC insured (Government insured mortgages), which will take effect April 19, home buyers will ALL have to meet the standards for the five-year, fixed-rate mortgages even if they opt for variable rates. And limits for refinancing will also be stricter as will the rules for people buying an investment property or rental home, they must now have a 20 percent downpayment.

The Finance Minister said the three measures will "moderate" the housing market saying the changes will prevent borrowers from building up "unsustainable debt levels" and "help Canadians prepare for higher interest rates in the future."

Since taking office in 2006, these are the second set of changes that Jim Flaherty the Finance Minister has implemented measures to cool the housing market. In 2008 CMHC said they would reduce the maximum amortization periods to 35 years and offer loan insurance on only 95 percent of the loan value, eliminating the 100% financing available to home buyers and eliminating the 40 year amortizations perviously available.

Canadian home prices and resales will grow to records this year boosted by low rates, the Canadian Real Estate Association said in a report last week. The group said last month that sales increased in December to a record 46,805 units on a seasonally adjusted basis, up 72 percent from a year ago.

Canada's average 5 year POSTED mortgage rate was 5.39 percent on Feb. 10. In May, it was 5.25 percent, the lowest since 1951, according to Bank of Canada

I hope these rules will be changed when rates rise again. This news does not make me happy. I already feel that we Canadians are already extremely conservative compared to our neighbours down South.

We are not allowed to deduct the interest we pay on mortgages as they are down South, and on investment properties, we are not allowed to carry forward the capital gains earned indefinetely (until retirement as most Americans will claim the capital gain once they retire and reach a lower income tax bracket).

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