Monday, January 17, 2011

New mortgage announcement ... A whole lot of nothing for investors

Below is the release from the government today on their second set of changes to the mortgage lending rules in the past year.  The positive news on this information is that it will have no effect on real estate investors that I have been working with.  This news will effect some investors who are on the fringe, who push the limits with investing. 

The new rules will effect the home buying market.  There are three major changes
1 - on CMHC backed mortgages ammortorization rates will drop from 35 to 30 years (note investors are not buying CMHC backed properties).
2 - On HELOCs (home equity lines of credit) the government will not offer CMHC insurance (note investors are not getting insured lines of credit)
3 - Canadians will be allowed to refinance their homes to a maximum of 85% not the current 90% (note investors are currently using 75% on rental properties)

Ottawa, January 17, 2011


The Harper Government Takes Prudent Action to Support the Long-Term Stability of Canada’s Housing Market

The Honourable Jim Flaherty, Minister of Finance, and the Honourable Christian Paradis, Minister of Natural Resources, today announced prudent adjustments to the rules for government-backed insured mortgages to support the long-term stability of Canada’s housing market and support hard-working Canadian families saving through home ownership.

“Canada’s well-regulated housing sector has been an important strength that allowed us to avoid the mistakes of other countries and helped protect us from the worst of the recent global recession,” said Minister Flaherty. “The prudent measures announced today build on that advantage by encouraging hard-working Canadian families to save by investing in their homes and future.”

“The economy continues to be our Government’s top priority,” continued Minister Paradis. “Our Government will continue to take the necessary actions to ensure stability and economic certainty in Canada’s housing market.”

The new measures:
•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 per cent. This will significantly reduce the total interest payments Canadian families make on their mortgages, allow Canadian families to build up equity in their homes more quickly, and help Canadians pay off their mortgages before they retire.
•Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes. This will promote saving through home ownership and limit the repackaging of consumer debt into mortgages guaranteed by taxpayers.
•Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs. This will ensure that risks associated with consumer debt products used to borrow funds unrelated to house purchases are managed by the financial institutions and not borne by taxpayers.

Our Government’s ongoing monitoring and sound underlying supervisory regime, along with the traditionally cautious approach taken by Canadian financial institutions to mortgage lending, have allowed Canada to maintain strong and secure housing and mortgage markets.

The adjustments to the mortgage insurance guarantee framework will come into force on March 18, 2011. The withdrawal of government insurance backing on lines of credit secured by homes will come into force on April 18, 2011.

For the e-copy of document, please click here


  1. Thanks for sharing, its pretty cool. This year I'm looking forward to take a break and enjoy nature as I go for vacation, well maybe after I find some Texas Land For Sale . Anyway I really like your blog and i really appreciate the excellent quality content you are posting here.

  2. Hey,

    There are some great summer vacation spots in an around the Ottawa area. Let me know if you are interested and I can get you some great information. It is about -10 farenheit now, so you might want to wait for our Canadian summers!!!