As If You Needed Even More Reasons to Invest In Alberta’s Commercial Real Estate Market

What are the country’s new mortgage rules and what do they mean? There are 4 major changes to be instituted on the 9th of July 2012:

1. Limiting Home Loans to a Maximum 25 Year Amortization

This is an incredibly big move and one which most probably don’t understand. It may achieve the goal of stalling home buying in eastern Canada which is blamed for pushing up home prices and encouraging builders to keep on building. However, it means those who do buy are going to be forced into higher payments and debt service which is supposedly also a major concern right now.

2. New Debt Ratio Limits

The Finance Minister announced the official incorporation of maximum debt ratio limits of 39/ 44%. This will probably have little effect in the short term, especially when borrowers should be staying below those figures anyway.

3. Capping Refinances at 80% of Home Equity

Reducing the amount of equity homeowners can withdraw from their homes in a refinance is actually a smart move for the country’s housing market and could help avoid the widespread underwater mortgage situation seen in the U.S. while leaving enough room for owners to sell when they need to but it could make moving and relocating more difficult for some.

4. No More High LTV Loans for Luxury Buyers

Those borrowing over $1 million will have to put down at least 20% on insured mortgages. Nice to cap the average tax payer’s exposure to bailing others out but perhaps incorrectly targeting and victimizing the one demographic who could keep the economy going in the east.