Mortgage Rules Change Again – 18 March 2011

Mortgage rules are changing again.  The rules are essentially because the Minister of Finance believes Canadians have too much debt.  The Economist and I agree with this; Canadians have the highest public debt in the world!!  However, mortgage debt (secured debt) is far less of a problem than unsecured debt like credit cards, lines of credit etc.  Unsecured debt is very problematic and at least in the past people have been able to consolidate unsecured debt in their mortgages, however, with the new mortgage rules that will become more difficult as you will see below.

Here are the new mortgage rules that take effect on 18 March 2011:

1. Purchases: As in the past, only 5% down payment required.  This is applicable to all purchases; not just first time home owners
2. Refinances: The mortgage cannot be more than 85% of the value of the property. (Currently up to 90%)
3. Amortization: Maximum 30 years (Currently 35 years)

There are no qualification rules for unsecured debt; it is up to every bank to approve applicants or not.  Unless the government addresses this problem Canada’s debt problems will be left unattended.  I believe the new mortgage rules will increase personal bankruptcies in the near future.