New mortgage-lending rules will be in place on March 18, 2011.
These new changes are two-fold:
1. People looking to buy a home with less than a 20% down payment will be allowed to have a maximum amortization of 30 years (down from 35 years). How this impacts first-time home buyers is that it will decrease their borrowing capacity by about $25,000 in purchase price. This is less than 5% of the total market for first-time home buyers.
2. People looking to refinance their mortgage to consolidate dept will have the options to refinance to 85% of the value of their home (down from 90%).
How will this impact you personally if you’re looking for your first home?
If you’re looking for your first home, you may need to consider a lesser value home. In Guelph, the majority of first-time buyers purchase in the price range of less than $250,000. I find the majority of first-time homebuyers understand the maximum amount of mortgage they can be approved for, and how that differs from what their budget can manage. Most first-time buyers who I see don’t want to be house poor.
How will it impact you personally if you’re carrying high-interest credit debt you’d like to consolidate?
If you’re looking to consolidate debt into your mortgage, you will be limited to how much debt can be wrapped into your mortgage. Once you’ve looked at better ways to manage your debt, your mortgage broker can also show you how to set up a budget to help pay down the debt that you could not consolidate.
How will these changes impact the market?
Remember, the media often publishes stories to sell papers and create buzz. For instance, there have been some recent reports that the housing market will tumble by 25 percent. There have also been reports that say the exact opposite. With so many opposing views, what will actually happen? Locally, the Guelph market has been protected by the downturn in the housing market that some other Canadian cities have experienced. On average, price appreciation in Guelph will plateau compared to previous years. When speaking to realtors, they note that we are in a “seller’s market”, which means that there is more buyer demand than houses available to purchase. On the other hand, buyers are being more picky about prices and the types of home they are buying.
