We have had a week now to reflect on the recent  government changes to mortgage policies. While it may not effect a lot of you, there are probably some of you, or you know someone who this may effect. The policies do not come into force until March 18^th, (however, last time this happened, several lenders put it in place before the cut off date) so there is adequate time to research out all your options and make sure you do not miss this window of opportunity.

The biggest change is the scaling back in the loan to value from 90% to 85% on refinances. On a $300,000 property, this means a loss of potential refinance dollars in the amount of $15,000. In addition, when analyzing the insurance costs, if you are going from a conventional position (80% and no insurance fees) it will make it very expensive to even consider extra insurance fees (2%$…5000- on a 30 year amortization-on a $250,000 mortgage) bottom line it means extra costs of $5000 to borrow $15000!!

The second part of the change has to do with the decrease in the amortization period from 35 to 30 years. While not as major as the decrease in the loan amount, it will result in higher payments and resulting in a more challenging qualification for some applicants (only if ratios-GDS/TDS are tight).

So the main purpose of this communication is as follows:  If you or anyone you know is thinking at all about consolidating any loans, borrowing additional funds for any purpose, you owe it to yourself to at least look into it right now to see if it is a benefit for you.  Our advice and guidance is always free to assist you in making the best decision for you or your family.

We would like to give a big THANK YOU for all the support we recieved with Neighbourhood Baby 2010!! This past weekend we just droped off our third load of donations!!  The first two loads went to the ‘David Busby Street Centre’ in Barrie and the third load went to ‘The Blue Door’  in Bradford that supports families going through a very difficult time.  Two fantastic charities, and because of everyones help we have been able to make a big difference. 

We will be continuing to give to these charities every month all year so that our family is helping other families in our community.

Flaherty tables new rules to curb household debt
By David Akin, Parliamentary Bureau Chief

Last Updated: January 17, 2011 8:15am

OTTAWA – The federal government Monday tabled a series of new rules aimed to curbing what it sees as the growing problem of household debt.

Finance Minister Jim Flaherty is changing the maximum length of most mortgages to 30 years from 35 years; cutting the maximum that can be borrowed against a person’s home and eliminating government-backed default insurance of home equity lines of credit.

Prime Minister Stephen Harper said Friday his government was “concerned about growth in the level of household debt.”

Bank of Canada Governor Mark Carney has also been warning of the dangers of rising debt levels.

The key tool the federal government uses to control the mortgage market is the Canada Mortgage and Housing Corp. (CMHC). Banks typically will not provide a mortgage to anyone with a down payment of less than 20% of the purchase price unless the CMHC is willing to backstop the loan.

The CMHC will now no longer insure any mortgage with a term longer than 30 years. Until the change, it was insuring 35-year mortgages.

Flaherty also instructed the CMHC it can no longer insure home equity lines of credits (HELOCs). That means individual banks will be on the hook for any HELOC defaults.

Because banks will assume all of the risks of default, banks are expected to tighten up eligibility requirements for HELOCs.

Finally, a person who wants to take out a loan against their home will be able to borrow a maximum of 85% of the value of their home, down from 90%.
Most of the changes are effective March 18, 2011.

If you have any questions on how these changes may affect you please don’t hesitate to contact me!
-Cory Kline