Posted 7.25.12 @ 8:15
Starting July 9, 2012 new mortgage rules come into effect for all Canadians. While the Oakville real estate market is still going strong and mortgage interest rates are lower than they’ve ever been (in our lifetimes anyway!), steps had to be taken so Canada could avoid a housing bubble or crash similar to America’s over the last decade. Here we’re going to go over what the new rules are and how they’re going to affect you. It’s important to understand these, even if you were pre-approved for financing your deal may have changed.
Max Loan Amortization Periods Reduced
If you have a 30 year mortgage, after July 8th 2012 you’ll only be able to get a 25 year loan at the maximum. This means that some homeowners may have to pay more each month, but it also means that people buying homes for sale now will be able to pay down their debts faster. Since maximum loan amounts are calculated by time, you may not be able to borrow as much money as you could before… but the change will be minimal and under 5%. This isn’t the only change however!
Max Amount You Can Borrow When Refinancing
Before you could borrow up to 85% of the amount of the house when refinancing your home, but now it’s been reduced to 80%; to put this in perspective American laws only allow most borrowers to refinance up to 60% to 70% of their equity. It’s more conservative to reduce this number, if only to keep people from getting upside down on their real estate in the future. Most home owners won’t even notice the difference, since people rarely borrow this much money in one go.
Changing How Lenders View Your Credit Score
Changing how lenders view your credit score can help you get a home. Loans like mortgages are granted based on something known as the “credit to debt ratio”. Your ratio now shouldn’t be more than 44% at any given time. If you have $100,000 of credit available to you right now (for the sake of easy math) that means you can’t have more than $44,000 in outstanding credit. It’s pretty easy to remember and you can figure it out with a little time and a calculator if you have to.
Fewer Government Mortgages for Homes under $1m
After the new rules came into effect in July, the government will be limiting how many and who can get government backed mortgages for Oakville real estate (and Canadian real estate in general). While most people won’t be affected by this, it could impact people with lower incomes trying to get a home. The average price for a home in the area is well under $1,000,000, so don’t worry!
The new rules, all in all, are a good thing. There might be some short term pain involved but in the end it’s what’s best for the economy.