Ottawa has made it tougher to purchase a home amid concerns about rising household debt levels and an overheated housing market.
Residents in Vancouver already have numerous obstacles when it comes to buying a home: inflated prices, limited housing stock, etc. But Ottawa just made it a little more difficult for potential homebuyers across the country.
Finance Minister Jim Flaherty outlined new rules Thursday for the Canadian Mortgage and Housing Corporation, the Crown corporation which insures most home mortgages in Canada.
The new rules change the maximum amortization period for a home mortgage to 25 years from 30 years, effectively increasing the borrower’s monthly payments. While the homebuyer’s monthly mortgage payments increase without the extra five years, the borrower saves thousands of dollars in the long run in interest.
The tightening of the amortization period will affect a significant segment of the homebuying demographic. According to the Canadian Association of Accredited Mortgage Professionals, around 40 per cent of people who signed off on a home mortgage last year chose an amortization period of 30 years.
The new rules also further limit the amount homeowners can withdraw when refinancing their homes from 85 per cent to 80 per cent of the home’s value.
The fed’s more stringent regulations are aimed at reigning in household debt and cooling off the overheated housing market.