The CMHC mortgage changes that came into effect yesterday are already curtailing sales in the Kitchener Waterloo real estate market. I spoke with a local home inspector who had a flurry of inspections cancelled recently as buyers were unable to arrange mortgage financing.
To summarize, the Canada Mortgage and Housing Corporation has gone back to a maximum 25 year amortization for those with less than a 20% downpayment. This was traditionally the case and the Harper government has now come full circle after increasing it to as high as 40% in 2007. Robert Kavcic, a Bank of Montreal economist, says that reducing the amortization from 30 years to 25 has the same effect as a .9% increase in mortgage rates. This policy change was prompted by warnings of increasingly unsustainable debt levels creating a housing bubble in Canada.
So what advice would I give buyers and sellers of Kitchener Waterloo real estate? For buyers, take a long term view as these changes will see people living in their homes longer. Make sure the location you are buying has good resale value and growth potential. A mortgage preapproval is critical as I expect sellers and agents to become more demanding as word spreads of sales falling through.
For sellers, get a big deposit at the time of the accepted offer as buyers are less likely to walk away from a firm sale. Request a copy of the lender preapproval and make sure it's recent to reflect the new mortgage landscape. Be patient as the days on the market for properties is likely to increase. As the competition and choices increase, it may make more sense than ever to sell first before buying. Finally, understand that your home is likely not worth what it was before the changes. If your motivation to sell is strong, be prepared to accept less as fewer buyers qualify for less mortgage.
As always, for sound real estate advice, feel free to call or email 519-505-4488 email@example.com.
Century 21 Home Realty Inc. Brokerage
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