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Posted by: Ryan Satnik
I found a great article this morning on credit and how the scoring works. It’s a good read for anyone looking to borrow money in the future. just copy and paste this link to your browser.
http://www.financialpost.com/personal-finance/What+affecting+your+credit+score/4126038/story.html
Posted by: Ryan Satnik
On January 17, 2011 the Honorable Minister of Finance, Jim Flaherty, announced several changes to the way Canadians can structure their mortgages. The most notable changes are:
1 – Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value ratios of more than 80%. Set to take effect March 18, 2011.
2 – Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85% from 90% of the value of their homes. Set to take effect April 18, 2011.
3 – Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs. Set to take effect April 18, 2011.
While I can appreciate the frustration of someone who, in the case of point one, is looking to purchase their first home and is all excited, I believe these changes are for the better. For example, in the case of this same first time home buyer, the public needs to appreciate the difference in monthly payment to be less then $100 when you shorten your amortization from 35 to 30 years on a mortgage of $300,000 at 5% interest. If that difference of $100 makes or breaks that clients monthly budget they simply should not be getting a mortgage of that size. Some may ask why I say that, it’s simple, life happens to a monthly budget that tight, how do you expect someone to pay for a new furnace, windows or flooring when the time comes? It is the job of a mortgage broker to educate their clients so they can make wise financial decisions with regards to their home and sometimes that decision is to walk away altogether. This will also significantly reduce the amount of total interest paid on by the average Canadian family over the life of the mortgage, build up more equity faster and ultimately pay off the mortgage before the homeowner is looking into retirement.
A great advantage with point two and three is they both encourage Canadians to pay down their debt sooner rather then later. On top of the fact that most HELOC’s, rather then being used for paying for improvements to a home, are used for the purchase of a new car, big screen, or some other form of consumer debt.
While Canada may not have been about to have the same type of housing bubble burst as the US did in 2008, we might not have been as far away as some might think.
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