New Mortgage Rules. How Do They Affect PEI Real Estate ?

 

On January 17,2011 Federal Finance Minister Jim Flaherty announced changes to government insured mortgages and new regulations to take effect on  April 18,2011. Full details can be found on the Federal Government’s web page.

The new changes are:

  • Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent. This will significantly reduce the total interest payments Canadian families make on their mortgages, allow Canadian families to build up equity in their homes more quickly, and help Canadians pay off their mortgages before they retire.
  • Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes. This will promote saving through home ownership and limit the repackaging of consumer debt into mortgages guaranteed by taxpayers.
  • Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs. This will ensure that risks associated with consumer debt products used to borrow funds unrelated to house purchases are managed by the financial institutions and not borne by taxpayers.

As with last year’s changes in February that the Minister made, it is my opinion that this will not make a dramatic effect real estate buyers on PEI.

The only change that has been made with regards to purchases is that a person applying fo a mortgage can only have the longest amortization of 30 years compared to 35. It has been our experience not only at Century 21 Colonial Realty but also at CENTUM Advantage Financial Group that this has not been a factor in the past few years. Most people will only go 20 or 25 years on their amortization period when purchasing a home.

Most of the changes relate to how Canadians can refinance their home and the products available to them. This does ensure that the homeowner does not continually draw out all available equity in their home and if circumstances change they will have some protection and some equity should they have to downsize.

Everybody’s mortgage needs are different and there are many products out there for you as a consumer to choose. It is important to do some research and to discuss with a professional in that industry. 

If you would like more information, contact any of our agents both at Century 21 Colonial Realty and CENTUM Advantage Financial Group.

If you would like to stay on top of real estate issues for PEI and other information from our office- Connect With Us !

 

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