If you aren’t already aware there was a major change that occurred regarding amortization periods for government-backed mortgages (CMHC or Genworth). We have had as high as 40 year amortizations in the past 5 years and now we are going back to how things were prior to 2004 with a maximum amortization of 25 years.
If you are a Saskatoon first time home buyer this may affect your purchasing power as you likely were pre-approved with a 30 year amortization. If you were more prudent and were following the 25 year amortization you won’t notice any change.
As a Saskatoon real estate agent I haven’t had a lot of buyers ask me about this yet however the change is happening and it is coming fast. Effective July 9, 2012 the rules are changing.
Canada’s Finance Minister Jim Flaherty has announded that:
Max amortization will be 25 years
Max amount an individual can borrow when refinancing is 80% from 85%
The gross debt-service ratio (GDS) will be set at 39% and the maximum for TDS (total debt-service ratio) will be lowered to 44% from 45%
Government-backed insured mortgages will no longer be available for homes with a purchase price of $1 million or more
This is the 4th move by the government since 2008 and brings things back to how they were around 2004 which is bringing more prudent and conservative standards back into place.
What does this mean to you as a Saskatoon home buyer? You may need to purchase sooner than later if you were relying on the 30 year amortization. For every $100,000 your home (mortgage) is valued your mortgage payments will go up approximately $50/month. This is just another reason you should use a reputable and trusted Saskatoon real estate agent to help you in your search as some are more informed than others.
It also means your qualifying income needs to go up.
While we do have some homes for sale in Saskatoon over $1 million this shouldn’t affect things too much as most buyers in that range aren’t in a high-ratio mortgage but we may see those homes sit for awhile longer.
If you have already purchased a house for sale in Saskatoon or surrounding area, as long as you take possession before December 31, 2012 there are no problems.
If you already have an offer on one of the Saskatoon houses for sale but you do not yet have your financing approved you should still be okay as of today. Each bank and lender may be handling this slightly differently so it is important to speak to your lender if you think this may affect you. Just because you have a pre-approval held does not mean you will get an extension-you must have an agreement of purchase prior to July 9th, 2012.
If you need some advice I have a few Saskatoon mortgage brokers I can recommend.
Saskatoon Real Estate Agent
Century 21 Fusion