Mortgages they will become effective July 9, 2012.
Here they are:
Maximum Amortization will be reduced to 25 years from 30 years
Maximum amount of equity that homeowners can take out of their homes will be reduced to 80% from 85%
Government backed mortgages will be limited to homes with a Purchase price of less than $1 million
Maximum gross debt service ratio will be fixed at 39 % and maximum total debt service will be fixed at 44%
These changes are a positive for the real estate market and consumers as very few people realize the tremendous extra cost in extending your amortization those extra 5 years. As an example, on a $300,000 mortgage at 4% interest you save almost $12,000 in just 5 years! If you look at the full term of the mortgage it will save you approximately $40,000! Remember that’s after tax earnings you need to pay for that difference! You get all that for a monthly payment difference of $150.00.
It is important that we understand the positives, this brings to our economy as it truly helps everyone in the long run.
Average home price trends over the past 30 years. Over the past 30 years, home prices have increased on average 6% per year, therefore each 5 year block should be 30%. Many of you remember the late '80's and looking back we can see the incredible price growth experienced at that time, over 3 times the average! The
good news is that over the last 12 years GTA price growth has not been off the charts which reduces the chance of a major housing correction significantly.
Courtesy: Chris Slightham, Broker Manager RLP Signature