Thursday, June 21, 2012

CAAMP NEWS

This morning, the Federal Finance Minister announced further changes to Canada's mortgage insurance rules.  Four measures were announced:

1. Amortizations reduced to 25 years
2. Refinancing limited to 80%
3. Properties purchased at over $1 million no longer eligible for mortgage insurance
4. GDS and TDS set at 39% and 44%
       CAAMP believes that Canadians understand the importance of paying down their mortgages.  These changes, together with new OSFI underwriting guidelines - also to be announced today - may precipitate the housing market downturn the government so desperately wants to avoid.  The changes take effect July 9, 2012. CAAMP was pleased that it was again successful in ensuring the 5% down payment rule remains intact; however, the government may have overreached with this latest round of changes.
To review this morning's Globe and Mail article click hereTo review the government press release and backgrounders click here
To contact Minister Flaherty or your local MP click here
Jim Murphy, AMPPresident and CEOjmurphy@caamp.orghttp://view.exacttarget.com/?j=fe5610727c6601747310&m=fe69157075640c7a7411&ls=fdea16767c60007b7013717c&l=febe1d7274630d78&s=fe20127771670c7c7d1678&jb=ffcf14&ju=fe2b107572650675751776&r=0

Ottawa tightening mortgage rules; no more 30-year amortizations

 ILL CURRY, GRANT ROBERTSON and TARA PERKINS
OTTAWA AND TORONTO — The Globe and Mail


The country’s biggest banks were caught off guard on Wednesday night as the Department of Finance prepared to clamp down on mortgages by reducing the maximum amortization for a government-insured mortgage to 25 years from 30.
Ottawa will also limit the amount of equity that can be borrowed against a home to 80 per cent of the property’s value, down from 85 per cent.
The moves are designed to cool the housing market and limit the record levels of personal debt Canadians have amassed in recent years. Figures from Statistics Canada show the average ratio of debt-to-disposable income climbed to 152 per cent, up from 150.6 per cent at the end of 2011. A rise in interest rates or further job losses could put some households at financial risk, endangering any economic recovery.
The Bank of Canada is expected to keep interest rates low for some time because the economy shows little sign of a strong recovery, so tightening mortgage rules is one way to ensure Canadians don’t get in over their heads during a prolonged period of ultra-low interest rates.
Reducing the maximum amortization on government-backed mortgages will eliminate the 30-year mortgage for most borrowers in Canada. The changes, which are expected to be unveiled at a news conference in Ottawa on Thursday morning, will translate into higher monthly payments, but result in the loan being paid off sooner.
Ottawa will announce two other changes, according to a source. It will no longer allow high-ratio mortgages over $1-million, and it will cap the gross debt service (which looks at a consumer’s total debt payments as a percentage of their income) at 39 per cent. While many banks tend not to allow mortgages over 40 per cent, there had been no official rule in place.
It is the fourth time in four years that Ottawa has moved to cool the housing market by tightening mortgage rules. In early 2011, Finance Minister Jim Flaherty reduced maximum insured amortizations to 30 years, and limited borrowing to 85 per cent of the property value.
CIBC economist Benjamin Tal described the changes as a “gentle push,” since the government didn’t make alterations to the minimum downpayment required on mortgages, which stands at 5 per cent.
“The fact that they didn’t change downpayments is a realization that doing so would probably be too severe given that the market is slowing down,” he said.
However, there remain concerns the changes could cause too abrupt a shift in the market. “All of these things might precipitate the housing market downturn that the government wants to avoid,” Jim Murphy, CEO of the Canadian Association of Accredited Mortgage Professionals, said in an interview.
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Wednesday, June 20, 2012

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3 mistakes when buying a new home

We bought our home when it was brand-new. There had been another buyer before us, but he backed out of the deal because of a foundation problem. The builder disclosed that the problem had been repaired. We were desperate and angry, so we purchased the property. Now we are selling it, and the buyer's home inspector says the foundation was not properly repaired. It seems that we've gotten ourselves into a real mess. What could we have done to prevent this? --Marion

DEAR Customer: You made three critical mistakes when you bought the property. The first was to buy it when you were "desperate and angry." Regardless of why you were feeling that way, a home purchase should never be based on negative emotions. Property is very expensive, and that kind of expenditure should be made only with clear thinking and sober rationale.
The second mistake was to accept the condition of the foundation without written proof of the repair work. Adequate proof would have been an engineering report on the foundation problem and a contractor's receipt for the corrective work.
The final error was purchasing the property without hiring a qualified home inspector. Buyers often assume that a new home does not need a home inspection, and many homeowners have come to regret that unfortunate assumption. Had you hired a home inspector, you might have learned that the foundation was defective. Then you could have had it repaired by the builder, or you could have backed out on the deal.

Call Amy Wilson to guide you through the purchase of a new home or a pre owned home - I have the right professionals to help you while I take care of the mortgage.