Ottawa' new mortgage rules - things to keep in mind
If you have not heard already, Ottawa recently introduced a series of new mortgage rules that will have an impact on the real estate market and you as a home buyer. If you have not been paying attention to the market of the past few years, this is not the first time that the government has stepped in and made adjustments to the rules for mortgages.
In this case, Finance Minister Jim Flaherty has made these rule adjustments in part to help protect the stability of the economy in Canada and prevent home buyers from borrowing more then they need.
Therefore, this move will assist in preventing home owners from buying homes and getting mortgages that are beyond their means. With low interest rates and low mortgage rates, money is easy to come by. With money so accessible, it is hard for many people to resist it.
What has changed?
The new mortgages rules have brought on a few important changes that will have an impact on home buyers in Ontario. They include:
Borrow to refinance rates: The amount that Canadians can borrow to refinance a mortgage has been reduced to 85% of the value of their house. The previous amount was 90%.
Amortization period: The mortgage amortization period has been reduced to 30 years. The previous time period was 35 years.
Government removes insurance backing: The government has decided to discontinue its support for lines of credit secured on homes.
How does this impact me?
The question that most people have is, how do these rule changes impact me? Here is what the new rules mean to home buyers:
The reduced amortization period will make it more difficult for home buyers to afford more expensive mortgages.
While your monthly mortgage payment will increase, home owners will be able to pay off their mortgage quicker.
It will be more difficult for people to use their home equity for their living expenses.
If you are not sure about how these new rules will impact your ability to secure a mortgage, visit the Canada Mortgage and Housing Corporation (CMHC) website for more information.