Recently the Government of Canada announced changes to the mortgage lending rules including:
- Maximum amortization for a mortgage is 30 years (down from 40 and 35)
- Refinancing a mortgage is limited to 85% of the property value (down from 90% and 95%)
- Lines of credit will no longer be insured by CMHC (this means that a bank will still provide a line of credit that will be limited to a maximum of 80% of the value of a property)
These rules are design to save people from themselves and to make sure they do not incur more debt than they can handle. Some in the marketplace have suggested that these changes will negatively impact the real estate market and the mortgage brokerage business. If you can create a marketplace of healthy borrowers who are not taking on more debt than they can afford and the government is working to encourage regulatory changes that offer consumers more protection how could anything but a great result be produced? There may be some very short term adjustments that will be made by all however the market is efficient and will sort itself out. Individuals working within this marketplace need to be seeking opportunities for improvement and profitability. Mortgage brokers can offer a tremendous amount of value to consumers and now is a great time to be investing in activities that help consumers understand how they can take advantage of homeownership.
Somehow people survived the early 80s (and subsequent market corrections) without 40 year mortgages and 95% refinances - I think we will be ok.
If you would like to chat about these mortgage changes, send us a message or email dylan@bridgecap.ca and we would be happy to help.
