Terri Stephens | 403-827-4663

 
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Make sure you check out the link below, new mortgage ruleson the way.

 

Ottawa’s new mortgage rules save us from ourselves.

The federal government is keenly interested, and for good reason.Although today’s buyers are meeting banks’ borrowing standards,many are taking on excessive debt.

Both Finance Minister Jim Flaherty and Bank of Canada governor MarkCarney have talked a lot about the risk that rising interest rates will makecurrent debt loads unmanageable for some. They should be so lucky as to haveinterest rates rise. That would require a turnaround in the global economy, andright now, the big worry is a new recession.

Rising rates are a longer-term worry, then. In the near term,there’s the problem of people taking on mortgages that demand too much oftheir financial resources. Sure, they can cover off their regular mortgagepayments. But what about saving for retirement or their kids’ universityor college education? And what about their ability to withstand a financialshock like a job loss?

The government has decided to thin the herd of buyers by loweringthe maximum amortization period to 25 years from 30 for people who requiremortgage insurance because of a small down payment. This means higher monthlyor biweekly mortgage payments, which will keep marginal buyers on the sidelinesuntil they either save more or make more. Most first-time buyers go with anamortization of 30 years today. Moving to 25 years isn’t draconian– that was the unquestioned standard for the decades that preceded theincreased amortization periods introduced several years ago.

The government is also curbing use of home-equity lines of creditby capping borrowing at 80 per cent of a property’s value, down from 85per cent. The government could have been tougher here. Enthusiastic use ofthese credit lines has been a big contributor to high levels of indebtedness.

Don’t be angry with Ottawafor making it tougher to get into the housing market. You’ll get yourmortgage paid off sooner with a 25-year amortization and, if you can no longerafford to buy, you’ve been saved from borrowing trouble

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