On Monday, January 17th, the government announced three loan financing changes designed to address concerns about increasing levels of household debt. The media coverage of this announcement has caused confusion with consumers. For one, the public is concerned that a higher level of downpayment is part of the changes. This is not true. Following is a publication of the Canadian Real Estate Association that explains what the changes are all about.
"Changes to Mortgage Rules
As anticipated in CREA’s recent Call to Action, the government today announced three loan financing changes designed to address concerns about increasing levels of household debt. A link to the government announcement is here.
First, the government will reduce the maximum mortgage amortization period from 35 to 30 years. Second, the maximum amount of the value of a home that can be re-financed will drop from 90 per cent to 85 per cent. And finally, government insurance will no longer be available to financial institutions wishing to insure home equity lines of credit.
It is important to note, the government did not increase the minimum downpayment, which was under consideration. And the reduction of five years to the amortization period is understood, given there was a possibility of a larger reduction. Thanks to all those who recognized the urgency of CREA’s Call to Action and wrote their Member of Parliament.
Together, these three measures are designed to ensure homebuyers invest responsibly in home ownership and don’t risk their financial security by buying too much home for their income or the country’s economic circumstance.
CREA recognizes the government is trying to take reasonable and responsible action with respect to household debt, but urges the government to refrain from additional measures until it can fully evaluate and assess the impact of today’s announcement " (source CREA).
If you have any questions please do not hesitate to give me a call.