Canada Unveils New Mortgage Rules... Again

[kaput]

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[Jeremiah]

What exactly does the last point mean?

[sputnik]

Originally posted by Jeremiah
What exactly does the last point mean?

Can't get a CMHC backed HELOC?

Basically banks are 100% on the hook for any defaulted HELOCs. I suspect that HELOCs will require 25-30% down.

[benyl]

Is this effective today? I don't see anything about an effective date.

[Tik-Tok]

Originally posted by benyl
Is this effective today? I don't see anything about an effective date.

Mid March

[kaput]

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[benyl]

Hmm, I guess my house is going up for sale... hahaha

[picmerollin]

buy now or be priced out forever!!!


:thumbsup:

[sputnik]

Originally posted by picmerollin
buy now or be priced out forever!!!

Or just wait for rules to get even tighter and watch house prices fall as people actually have to stop and save before they can buy a house.

I would love to see us go back to a world where you need 25% down before you can buy a house.

[speedog]

Originally posted by picmerollin
buy now or be priced out forever!!! Yeah, you go with that. :nut:

[lint]

what's going to happen to those with 5% down, 40 yr amortizations, who have to renew for 15% and 30 yrs? Hope they've been making extra payments and their house prices haven't dropped

[benyl]

More info.

http://www.fin.gc.ca/n11/data/11-003_1-eng.asp

[broken_legs]

There is no bubble. Everything is fine. Consume. Obey.

[Tik-Tok]

Originally posted by lint
what's going to happen to those with 5% down, 40 yr amortizations, who have to renew for 15% and 30 yrs? Hope they've been making extra payments and their house prices haven't dropped

The monthly difference between 30 years and 35 years amortization at 5% interest on $400g, is only $130/month. Anyone who stretched themselves so thin that can't afford that extra, should probably think about selling anyways.

I have wondered about people who are upside down at remortgage time though. I suppose they're screwed no matter what?

[kaput]

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[kaput]

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[lint]

Originally posted by Tik-Tok


The monthly difference between 30 years and 35 years amortization at 5% interest on $400g, is only $130/month. Anyone who stretched themselves so thin that can't afford that extra, should probably think about selling anyways.

I have wondered about people who are upside down at remortgage time though. I suppose they're screwed no matter what?

My example wasn't the difference in payments. If you only put down 5% on a 40 yr and go with reg payments, you'll only have 5-8% of the principle paid down after 5 yrs. On renewal, you can only get 85% LTV and a 30 yr max. 10yr difference in amortization AND finding another 5% to qualify. Add in higher interest rates and decreased home value, and some people are in for some hurt

[in*10*se]

hmmm serious going to screw my investment property later on when its completed.

[BigMass]

Originally posted by kaput
Random article (just google for others):

This will only drive prices up up up! :devil:


Originally posted by picmerollin
buy now or be priced out forever!!!
:thumbsup:

Wtf are you guys talking about. Stringent mortgage rules aimed to curb debt levels will hinder the consumer’s ability to bid up property as high as they could previously. This, along with higher interest rates will do nothing but lower house prices. Not only will house prices drop but so will consumer spending due to the lower amount people will be able to borrow on their homes and the coming rise in interest rates.

I don’t think people realize what kind of a bubble we live in up here compared to what’s going on in the US right now. The delayed affects of debt crisis and the quick actions of the stimulus averted what was setting up to be our own housing crash. Current prices are being propped up through tax credits, incentives, artificially low interest rates and rising inflation. One you start removing those artificial government supports then the entire things start collapsing again. That’s why I predicted low interest rates forever because if rates ever go back to anywhere near %5 the economy would implode and the government won’t let it. But if they do raise rates to combat inflation or to follow any actions set by the US, China or Europe we could be in for a rough ride.

[Pacman]

Originally posted by lint


My example wasn't the difference in payments. If you only put down 5% on a 40 yr and go with reg payments, you'll only have 5-8% of the principle paid down after 5 yrs. On renewal, you can only get 85% LTV and a 30 yr max. 10yr difference in amortization AND finding another 5% to qualify. Add in higher interest rates and decreased home value, and some people are in for some hurt

yikes! I didn't realize those rules applied to those who already had mortgages and were simply renewing.

[lint]

Originally posted by Pacman
yikes! I didn't realize those rules applied to those who already had mortgages and were simply renewing.

I stand corrected. According to this Q&A in the Globe, there is no impact on existing mortgages

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/what-do-the-new-mortgage-rules-mean/article1872799/

[Abeo]

"We remain of our long held belief that Canada is tapped out on housing and household finance variables that are all at cycle tops, in contrast to the U.S. that has already moved well off cycle tops and may be creating some pent-up demand," said Scotia Capital economists Derek Holt and Gorija Djeric.

"Examples include the home ownership rate, house prices by any definition, near record debt payments as a share of after-tax incomes, near record weakness in housing affordability, and record debt-to-income and debt-to-asset ratios."

Mr. Holt added in an interview that mortgage innovations over the past few years pulled in some buyers who might not have otherwise been inclined. Now, this "pent up" demand is gone and "the party's over."

But there is no bubble. Buy now, or forever be priced out!

This is what we get when we treat shelter as a futures market.

[picmerollin]

Originally posted by sputnik


Or just wait for rules to get even tighter and watch house prices fall as people actually have to stop and save before they can buy a house.

I would love to see us go back to a world where you need 25% down before you can buy a house.


bahahah - I guess the sarcasm wasn't clear enough - I am definitely a real estate bear and feel that the hype machine is finally going to swallow its own tail!!!

so many people will be underwater - may need to sell, harder to get a mort., prices lower - harder to sell - prices lower. and around and round we go.

then there may be a flood of downsizing boomers.

interesting times - to say the least.

[Super_Geo]

Originally posted by in*10*se
hmmm serious going to screw my investment property later on when its completed.

Yup, that is exactly their point.

[Idratherbsidewayz]

Soooo, renting is looking better and better until things become more clear...

[max_boost]

But 89coupe says, prices won't drop, if anything, with these new rules, it'll go up 10%!

I'm kidding. :rofl:

[lint]

Originally posted by max_boost
But 89coupe says, prices won't drop, if anything, with these new rules, it'll go up 10%!

I'm kidding. :rofl:

He guaran-damn-teed prices would go up this year

[89coupe]

They won't. New home prices will continue to go up.

[Super_Geo]

Originally posted by 89coupe
They won't. New home prices will continue to go up.

Retard.

[Abeo]

Originally posted by 89coupe
They won't. New home prices will continue to go up.

Probably important to note that this is what he's saying.

In all seriousness, care to explain why you hold this belief?

[lint]

Originally posted by Abeo
Probably important to note that this is what he's saying.

In all seriousness, care to explain why you hold this belief?

Because ballers don't buy used houses.

[kenny]

While I think the home sales market will be affected by this change, it would be a stretch to say that it would have a significant impact on home values.

These changes affect the edge of the market, those that really couldn't afford a home that were approved for 35 year/5% down mortgages, etc. To say that a ton of people will be priced out of the market resulting in a significant downward trend for home prices means that a big portion of home buyers should not have been approved to buy homes in the last few years. (Not sure if I agree with that)

We'll probably see fewer fancy toys on the streets as the banks reduce the size of existing LOCs but I don't see home prices plummeting because of this change.

[dawerks]

House prices miiight go up until March (rush to buy before the new rules?), but the rules aren't that stringent that there should be any type of rush.

BUT, prices should fall (after March) as there are always buyers on the margin. The rules always effect just the people on the outer standard deviation.

The # of eligible buyers will drop. Therefore, prices have to go down.

New house price could possibly go up, why? Because new house sellers have ways around the rules and offer marginal buyers a way in.

[Abeo]

Originally posted by kenny
While I think the home sales market will be affected by this change, it would be a stretch to say that it would have a significant impact on home values.

These changes affect the edge of the market, those that really couldn't afford a home that were approved for 35 year/5% down mortgages, etc. To say that a ton of people will be priced out of the market resulting in a significant downward trend for home prices means that a big portion of home buyers should not have been approved to buy homes in the last few years.

We'll probably see fewer fancy toys on the streets as the banks reduce the size of existing LOCs but I don't see home prices plummeting because of this change.

I wouldn't say that the 35 year mortgage only allowed new people into the market, I'd say that it overall increased the amount people would mortgage since they could handle it month-to-month better.

Someone who budgets $1500 a month on a 4% mortgage for 35 years could afford a 340k mortgage, now they can afford a 315k 30 year 4% mortgage for the same $1500 a month. It'll be interesting to see the effect, anyways.

[lint]

at $400k for the average house, the new rules mean you need a extra $20k for your down payment (15% vs 10%). I know that this is nothing for the average beyond baller, but not everyone is going to have that lying around. so that means you either need to find a cheaper house or you need to wait and save up more. if purchasing power goes down, how are house prices expected to rise?

[kenny]

Originally posted by lint
at $400k for the average house, the new rules mean you need a extra $20k for your down payment (15% vs 10%). I know that this is nothing for the average beyond baller, but not everyone is going to have that lying around. so that means you either need to find a cheaper house or you need to wait and save up more. if purchasing power goes down, how are house prices expected to rise?

Minimum down payments aren't being changed... unless I missed it.

[Kavy]

Originally posted by kenny


Minimum down payments aren't being changed... unless I missed it.

You are right they have not changed.

[lint]

doh! only on refinancing. :(

[kaput]

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[autosm]

Copy and pasted ,,,

http://www.ratesupermarket.ca/blog/new-mortgage-regulations-%E2%80%93-your-questions-answered/?utm_source=RateAlert&utm_medium=referral&utm_term=Blog_FullListLink&utm_content=RulesAnnounce&utm_campaign=RateAlert



What are the pros?


By lowering the maximum refinance amount, it discourages consumers from consolidating debt into secured mortgage debt backed by taxpayers.


The end of CMHC insured HELOCs will place more responsibility on the lenders approving these types of loan, so again, taxpayers are off the hook.

[masoncgy]

New home prices are going to rise when a whole swack of first time buyers just got shut out of the market...

Yeah, that sounds logical.

LOL... :nut:

[Mattloaf]

Let me see if I understand this correctly...

We have a rash of home buyers leading up to the middle to end of 2007. These people paid more for their homes than anyone up to this point. A good portion of these people took out 35yr mortgages with little to nothing down and have been making the regular payments. These are the same people who will be renewing these mortgages in 1-2 years time.

The banks are now going to re-finance these mortgages at 30yrs or less, and require up to 15% of what is owing on the house just to do it?

Is it safe to say we could see another rash of people handing over keys to the banks and things selling off the way they were in the 80's again?

Maybe it's time I start piling money under my mattress to take advantage of these sweet deals to come... ;)

I am curious though, the majority of people on here clearly know more about this than I do, if you were in their position today, upside down in a home by potentially 10's of thousands and knew you were going to need to refinance in 1-2 years with the need to come up with the difference, how would you react today? How would you prepare for the blow? Or avoid it entirely? (Beyond ballers need not reply:D )

[snoop101]

If people need to put more down and need to wait till they have enough money to buy then they will need to rent. This would drive up low to medium housing/condos and leave the higher ones stagnant. I think that makes sense.

Another thing to think about is that Calgary real estate seems to be more based on our economy. Oil and gas seem to run the show here in Calgary and this is one busy season. that means this year might be the year that projects start up again and that means more people to Calgary, which in return means more housing/rentals needed.

IMO

[89coupe]

Originally posted by snoop101

Another thing to think about is that Calgary real estate seems to be more based on our economy. Oil and gas seem to run the show here in Calgary and this is one busy season. that means this year might be the year that projects start up again and that means more people to Calgary, which in return means more housing/rentals needed.

IMO

The oil industry is booming, correct. I know 6 people in the last few months who have decided to build a new home because things are going so well.

Money is flowing. I think people will be surprised at the numbers year end.

Used homes will be tougher simply because there will be such a flood of listings on the market from all the people selling to upgrade.

[kenny]

Originally posted by Mattloaf
Let me see if I understand this correctly...

We have a rash of home buyers leading up to the middle to end of 2007. These people paid more for their homes than anyone up to this point. A good portion of these people took out 35yr mortgages with little to nothing down and have been making the regular payments.


Assumption or fact? I haven't seen a report that says a good portion of new mortgages during that time were of the 35 year variety. I'm curious what the breakdown is and how many chose 35 years out of necessity vs more freedom (some examples of the latter are on our forums)




The banks are now going to re-finance these mortgages at 30yrs or less, and require up to 15% of what is owing on the house just to do it?


No, renewing a mortgage is not "refinancing", no one is required to have 15% down and when renewing no one is going to be required to cough up enough money so they have 15% equity.

The lowering of the max LTV ratio is an attempt to stop people from using their houses as ATM machines buying toys they can't afford.

[kaput]

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[benyl]

Originally posted by Mattloaf
Let me see if I understand this correctly...



You don't understand it correctly.

This is not retroactive.

Someone with a 35 year mortgage that is coming up for renewal after a 3 year lock in can still renew at the same institution for 32 years.

If they move to a new bank, they have to re-qualify at a 30 year amortization.

[Xtrema]

This change will not impact new home buyers much other than making sure they are a tiny bit more financially sounds before CMHC take them on.

This change will not impact home owners facing a renewal.

This change will remove CMHC from insuring HELOCs which is great. No way should taxpayer insure someone's toys they can't afford. So banks would slowly reduces limit or raise rate on HELOCs but I would assume if you're on CMHC, you won't have much limit on HELOC anyway.

Nothing to see here. Impact to RE market and house prices would be minimal.

Oil price is great and that sector is now moving again, I start to see a lot more hiring from major oilsand players and engineering firms. But gas still sux and will be for a long time so we won't see the boom we had before.

[kaput]

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[Xtrema]

Originally posted by kaput
I'll calculate how much less I can afford in a bit, but I'm guessing my budget just dropped by about $10,000.

$10K is dick all when you buy a house (that's 2.5% of a median selling price in Calgary).

And that's basically your average new home furniture budget anyway.

[kaput]

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[Xtrema]

I'm saying in a sense of getting a $380K loan vs $390K loan and what that $10K difference will make on your home selection.

It's probably not a lot.

It also doesn't change much on the payment side, you're looking at less than $100 a month. And I have said it many times before, home owner must leave enough in the budget to deal with these minor rise in cost, be that interest rate, taxes or home repairs. You don't go buy a home without enough buffer in your budget.

I think everything done here is to avoid a bubble by removing risky owners and discourage incredible raise in prices.

[Abeo]

Originally posted by Xtrema
I'm saying in a sense of getting a $380K loan vs $390K loan and what that $10K difference will make on your home selection.

It's probably not a lot.

It also doesn't change much on the payment side, you're looking at less than $100 a month. And I have said it many times before, home owner must leave enough in the budget to deal with these minor rise in cost, be that interest rate, taxes or home repairs. You don't go buy a home without enough buffer in your budget.

$400k Mortgage @ 4% and 35 years: $1771mo
$400k Mortgage @ 4% and 30 years: $1910/mo ($139/mo difference)

$1771/mo @ 4% and 30 years = $371k Mortgage (29k difference)

Thats a far cry from 10k. Agreed about budgeting, though... but how many people are really looking that far ahead?

[benyl]

Originally posted by kaput
I'm not even sure how to respond to your $10k is dick all comment. You must make a lot of money?


When it comes to houses, it isn't much.

On a 30 year amortization, it is less than $50 / month.

That is one (1) 89coupe lunch.

[bspot]

Originally posted by 89coupe

Used homes will be tougher simply because there will be such a flood of listings on the market from all the people selling to upgrade.

Used homes can be sitting on land that is actually worth something.

New home = likely somewhere in butt fuck nowhere.

[sputnik]

Originally posted by Abeo


$400k Mortgage @ 4% and 35 years: $1771mo
$400k Mortgage @ 4% and 30 years: $1910/mo ($139/mo difference)

$1771/mo @ 4% and 30 years = $371k Mortgage (29k difference)

Thats a far cry from 10k. Agreed about budgeting, though... but how many people are really looking that far ahead?

$400k mortgage?

WTF?

Have you people never heard of concepts like starter homes, smaller condos or saving money?

[93mr2gt]

If anything, i think starter homes, condos, townhouses will see an increase in price. Where as the larger homes will see the prices stabalize... People with rental properties should see more interest as well...

[Speed_69]

Less people are going to be able to qualify for a mortgage. That means there will be fewer home sales. More supply/less demand. How does that equal increase in price?? :confused:

[89coupe]

Originally posted by Speed_69
Less people are going to be able to qualify for a mortgage. That means there will be fewer home sales. More supply/less demand. How does that equal increase in price?? :confused:

Why will there be less people?

[snoop101]

Originally posted by Speed_69
That means there will be fewer home sales. More supply/less demand.

That does not make sense.

People moving into Calgary from other locations and getting good oil & gas jobs will have the money to buy new houses. There will be a demand for those houses and the small amount that the new rules make will not effect those people. People like myself who bought 3 years ago during the peak will not be able to sell anyways because we would loose money. So we either hold or rent it out. Either way we are not selling. IMO there will be less on the market and more people buying in the spring, until prices get to a price where someone like myself can sell. Even though I own a condo I still dont think I would sell for another 3-5 years when then were back into a boom.

[kenny]

This thread is hilarious, seeing people talk about how prices will take a nose dive because of some mortgage rules being adjusted.

There are many many factors involved that affect house prices, and one of them changing doesn't necessarily mean prices will go down. Each factor will put upward or downward pressure on prices and it'll be the combination of all of these effects that determines whether or not prices will go up.

With that said, prices MAY go down, but not based solely on tightening of the mortgage rules.

[Xtrema]

Originally posted by sputnik


$400k mortgage?

WTF?

Have you people never heard of concepts like starter homes, smaller condos or saving money?

Average, starter home can be had for $300k

Will price go down? Not just bc of the rule change. It only moved the bar a bit higher but not by much. Real drive on price will still be the economy.

[civic_rida]

Probably less speculative buying and less infills being built.

[89coupe]

Saw this.

http://www.calgaryherald.com/business/Resale+house+prices+Calgary+expected+climb/4145007/story.html

[Lex87]

best rate mortgage (http://www.ratesmortgage.ca/)

Originally posted by broken_legs
There is no bubble. Everything is fine. Consume. Obey.

You know it! Consume, conform, obey, that's my motto. :burnout:


__________________
best rate mortgage (http://www.ratesmortgage.ca/)

[tpurcell4]

Originally posted by benyl


You don't understand it correctly.

This is not retroactive.

Someone with a 35 year mortgage that is coming up for renewal after a 3 year lock in can still renew at the same institution for 32 years.

If they move to a new bank, they have to re-qualify at a 30 year amortization.

Actually this is still only a half truth. If you are switching or transferring your mortgage to a new lender you should still be able to keep your 32 year amortization on this mortgage. You just cannot request more money. Otherwise lenders could charge what ever they want on renewal and there would be nothing people could do about it.

The bigger concern are collateral mortgages. For example, TD bank registers 125% of the price of your home's value on title, which will make it near impossible to get out of this mortgage with out selling your home. The only way to get out is to sell or refinance, and if you do not have enough equity to refinance the lender could renew you into a posted rate with out a fight. This is unless they make an exception that allows people in these collateral mortgage to refinance in order to move to another lender, and as long as they do not request new funds and then the new lender honors the terms of their original mortgage as they would with a simple switch/transfer.