Category Archives: mortgage

No more 30 year mortgages.

..well that headline is a little misleading, you’ll still be able to get a 30 year mortgage but you better have a big down payment. No more 30 year mortgages for CMHC insured mortgages.

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.

So we’ve come circle with mortgages going from 25 year, cranked all the way up to US bubble style zero-down 40 year mortgages and then ramped back down over the last few years to a maximum 25 year amort. It will be very interesting to see what this does to some of Canadas overpriced markets.

Heloc LTV going to 65%?

Canadian Mortgage Trends is saying that changes to HELOC loan to value (LTV) limits are a done deal.

If so this means the maximum HELOC you’ll be able will move from 80% to 65% of the total value of the property.

Read the original link for full details. Many commenters there seem to think this is too big a move.

Appraiser said…
65% is too much of a leap all at once.

I can’t understand why OSFI doesn’t ratchet the LTV ratio down a little more slowly (i.e., 5% at at a time and sit back to observe the consequences).

As has been noted lately, the previous three sets of mortgage tightening guidelines have been gradually working their way through the credit markets effectively.

You can kill an ant with a hand grenade, but it usually makes a hell of a mess.

Mortgage brokers warn about new rules

Canadian mortgage brokers are freaking out about new refinancing rules proposed by the OSFI which has taken over responsibility for the CMHC. Reasonably enough, they’re asking for clarification about proposals to require banks to check income and current house value before refinancing.

Currently, when mortgages come up for renewal, banks tend to focus on the borrower’s payment history. They rarely appraise the property again and not all banks will check the borrower’s updated income level, Mr. Murphy said.

“CAAMP strongly recommends that this concept be clarified so that mortgages continue to be renewed at maturity without requalification,” the industry association said in a submission to the Office of the Superintendent of Financial Institutions (OSFI).

“If not, homeowners who have been in compliance may no longer qualify. This would result in a number of properties hitting the market at the same time and thereby driving down prices.”

Such a phenomenon could add further fuel to a real estate downturn if lower house prices and higher unemployment caused more people to lose their homes upon renewal, Mr. Murphy suggested.

Read the full article in the Globe and Mail.

Bank offers you should not accept

Many Franks pointed out this article in the Financial Post, which offers a flipside view to yesterdays “do whatever it takes to scrape up 5%” article.

It has a real simple message: Banks exist to make money.  That includes making offers that sound good but may not be in your best interest.

While many people want to blame the banks or the government for Canadas alarming consumer debt problem, theres only one person who is truly to blame: the consumer.  Sign yourself up for a suckers deal and you have only yourself to blame.

While some bank chief executives have put it on themselves to tighten their own lending rules, others continue to look to Ottawa to take the lead.

In the interim, all you have to do is walk into a branch, grab some pamphlets and you will see an array of offers that could get you into even more debt trouble.

One of my favourites is the cash-back mortgage. It is offered to a varying degree by most of the major banks, so there is no point in picking on any one institution.

Here’s the offer: Take out a mortgage for more than five years and get 5% of the value of the mortgage up front to a maximum of $25,000. In other words, get a $500,000 loan and immediately get $25,000 back. “It’s great for first-time buyers,” we’re told.

Really? If the loan is at the posted rate of 5.44%, which it usually is for these types of mortgages, you could easily land into more debt trouble long term.

Another deal tries to lure me over to a new bank with an offer of 2% cash up front, or up to $4,000 on $200,000 if I switch to the financial institution. But what about the costs to break my existing mortgage, and is there really any point in switching products to get that cash right away if I’m going to end up with a higher rate and a less-flexible mortgage?

“Somebody is going to pay for it,” says Kelvin Mangaroo, president of, about the cost of the promises. “Sometimes there is more fine print than the actual offer.”

Check out full article here.

What do you think, do we need more consumer protection to protect consumers from themselves?