40 Year Mortgages and New Government Rules

The Canadian Government has announced adjustments to the rules for government guaranteed mortgages. Some of the changes include:

* Fixing the maximum amortization period for new government-backed mortgages to 35 years;

* Requiring a minimum down payment of five per cent for new government-backed mortgages;

* Establishing a consistent minimum credit score requirement; and

* Introducing new loan documentation standards.

What does this mean for the real estate market? Well at this time, there are several factors putting downward pressure on the Canadian Real Estate market, and this new government policy is one more factor. Other factors include:

Supply and Demand: ByTheOwner.com’s SOLD properties have increased 27% so far this year, but according to CREA numbers, MLS listings have increased, and MLS sales have decreased across Canada. This means that there is more supply of homes and less demand for homes, which puts pressure on selling prices

Employment Data: There were 24,000 jobs lost in June. This means that many people might need to sell their home, or might not look to purchase their next home.

As prices decline many buyers look to purchase For Sale By Owner homes because there is more room to save money. For example, if 2 identical homes are being sold for $300,000 (one with ByTheOwner and the other with an agent), the home owner selling privately is able to sell their home for $295,000 and still save $10,000 in commission. Whereas the home being sold with an agent will be required to pay commission on the $300,000 and if they sold their home for $295,000, they would end up taking home only $282,000 (Assuming a 5% commission).

To read more about the recent changes, you can visit:

Government of Canada makes changes to government guaranteed mortgages.

Toronto Star: Say goodbye to 40-year mortgages

ByTheOwner.com

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