On Wednesday, July 9th, 2008, the Government of Canada announced that it is making changes to insured mortgages – changes which will take effect October 15th, 2008.
The maximum amortization period allowed on insured mortgages will now be 35 years, as opposed to 40 years (something that was brought into effect in 2006). Home buyers will now also require a minimum down payment of five percent of the purchase price of the home in order to qualify for mortgage financing. Other changes to tighten up the lending practices will also include a consistent minimum credit score, and new loan documentation standards (yet to be specified).
Our advice to anyone who is counting on either 100% financing or a 40 year amortization, or both, to qualify for the purchase of a home, to purchase a home NOW before these new rules come into effect.
These changes are coming in light of the housing bubble in the United States. The Government of Canada wants to reduce the risk of something similar happening in Canada, and wants to ensure that Canada’s housing market remains strong. They also want to encourage home buyers to invest more in their homes.
The lessened amortization period could make it harder for home buyers to afford a mortgage payment, but it will also help them save money on interest costs over the long run.
If you’d like to new how these new policies affect you and your mortgage, please contact First Foundation.