Inclined Concerns due to Decline in Amortization
As of the summer of 2012, it was announced that the previous thirty-year amortization mortgages, would now be set at twenty-five years for those entering into the homeowner’s marketplace.
That means, the maximum refinance allowable is now 80%, with no insured mortgages over $1,000,000.
The Government of Canada is continually trying to strengthen Canada’s questionable housing finance system, and as such – the Minister of Finance seems to be constantly adjusting the rules for government-backed insured mortgages.
He was recently quoted as saying:
“Our Government stands behind the efforts of hard-working Canadian families to save by investing in their homes and their future. The adjustments we are making today will help them realize their goals, build on the previous measures we have introduced to keep the housing market strong, and help to ensure households do not become overextended. As just one example, the reductions to the maximum amortization period since 2008 would save a typical Canadian family with a $350,000 mortgage about $150,000 in borrowing costs over the life of that mortgage.”
So what does that mean in laymen’s terms?
– By reducing the amortization by 5 years, the idea is that Canadians will pay less interest on their overall mortgage. Thus helping them build equity in their homes more quickly, and pay off their mortgages more quickly. Of course there is an increased cost up-front, but they are hoping this is overlooked for the big picture.
– This reduction in amortization also means that the maximum Canadians can borrow has lessened from 85% to 80% of the value of their home.
– The total debt a homeowner can incur is 39%, this -in hopes- that Canadians will not overspend on a mortgage that might increase and become un-affordable.
– Limits are also placed on the government-backed insured mortgages for those purchasing a home less that one million.
The ideal scenario is that investing in your home is a way in which for you to save money. Mortgages were created for long-term investments, but the quick cash-grab of over-inflated markets and house-flipping, has made this notion a foregone one. So this move by the government is a hard reminder of the intended use of a mortgage.
Although we agree with the general idea behind this “saving” measure, we still understand that the amortization changes to not change the real estate price point around the Lower Mainland, and the struggle some people have to break into or out of that market at a fair price.
However, that is where Richardson Appraisals come in. We ensure that your purchase or sale price is based on TRUE market value created by a knowledgeable individual, and not one set by an industry.
We are pretty certain that everyone desires an investment to save, and we are here to help make that a reality and not just a suggestion …with the optimal purchase and sale of your chosen property.
Consider Richardson Appraisal – your appraisal partner as you journey to your purchasing destination.
Feel free to call us any time for further help and advice to help you reach that destination!
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