Ottawa Changes Mortgage Rules!
OTTAWA has made it tougher for people to get mortgages
. Here are some of the changes that will affect home buyers when applying for a mortgage in Ottawa or any place else in the country. The rules took affect in April of 2010.
1. Ottawa is going to require that borrowers meet the standards set for a five-year fixed-rate mortgage, even if the buyer wants a variable rate mortgage. This applies to all first-time buyers. If you are a homeowner with an insured mortgage are you are not affected, unless they choose at a later date to extend the amortization or look to refinance.
2. If you want to refinance your mortgage to pull out equity the maximum amount that can be withdrawn to 90% from 95%.
3. If you are buying an investment property and you are seeking a government backed mortgage then you will need at least 20% down. This has changed from only 5% down.
Mr. Flaherty said "There's no clear evidence of a housing bubble, but we're taking proactive, prudent and cautious steps today to help prevent one," Thanks a lot! He says it will stabilize the housing market and that doing so is a good thing. The only problem I see with this is it shuts the door to home ownership to a lot of people. One of the real causes of out of control real estate prices is the huge commissions made every time someone buys or sells a home.
I have to be honest, there is a positive to all this. Here it is. Like most people everyone wants to own their own home and that's a good thing. The problem with super low interest rates is that they don't last and when mortgage rates go up, so do your monthly mortgage payments. If your mortgage is at 3% you are paying $1,000 monthly and the rates go up to 4.5% - now your mortgage payment is $1400 and you could find yourself in a real bind. There is nothing to say that the rates may go to 8,10 or 12% or higher. I can remember when the mortgage rates in Ottawa were as high as 18%.
So the positive thing is it is sort of protecting people from themselves. If you are allowed to just squeeze into a 95% mortgage placing yourself in a dangerous position financially and the rates go up, you are going to be in trouble.
In conclusion, we think the changes that were made were for the better. We need only to look at what happened in the sub prime lending frenzy to see why Ottawa stepped in to protect people from themselves and the economy from disaster.
Ottawa Changes Mortgage Rules!
By: George Ferguson F.I.C.
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