Due to our debt, Canada makes another change to our Mortgage Guidelines….Effective April 19th 2010

Our “Drowning in Debt” habits have left our Government with no choice but to make some changes…

Some of us have already forgotten the changes that were made back in October 15th 2008. …. Lets recap

• CMHC will no longer offer a 40 year amortization, 35 year will be the highest
  -100{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} financing is no longer, 5{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} equity or DownPayment is mandatory

• Minimum Credit score went from 580 to 620
  The changes we will now see to come in effect April 19th 2010 are:

• Refinancing will be limited to 90{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8}down from 95{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8}

• Non Owner Occupied properties will require a 20{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} downpayment up from 5{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} down.

• Variable rate mortgages qualify at a 5 year fixed rate instead of the lower 3 year rate.
  Although the recession may technically be over in Canada, many households sank even further into debt in 2009, creating the highest debt-to-income ratio ever seen in Canada, according to The Vanier Institute of the Family’s annual assessment on the Current State of Canadian Family Finances released Tuesday.

The study showed the average Canadian household debt climbed to $96,100, creating a debt-to-income ratio of 145 per cent in 2009, the highest it has ever been. “Under this scenario, some 1.3 million households could have a vulnerable or dangerously high debt service load by 2011,” the report stated.

“The effects of this recession will test the resilience of many Canadian families. While the stock market may be up, the improvement for families will lag behind in terms of employment, increases in income, and a return of net worth,” Clarence Lochhead, the Institute’s executive director said in a statement.

The Institute’s report also indicated 59 per cent of respondents said they would be in trouble if their paycheque was delayed by even a week, even though 70 per cent of women with young children and a working spouse said they were working outside the home.

Personal debt is an increasing problem, according to the study, with a 50 per cent increase in mortgages running 90 days or more in arrears in 2009 compared to a year before. The number of credit card holders who were behind at least three months in their payments was up 40 per cent during the same period.

The report also indicated that there was likely a housing bubble, as housing prices in October and November 2009 increased to about $340,000, or five times the average after-tax incomes of Canadian households. The long-term average is 3.7 times. The report warned “higher interest rates, changes in mortgage terms and the realization that current prices are unsustainable may cause the bubble to burst.”

Basically, we have to start taking responsibility for our own debt and start budgeting a little harder.

Michael Mullis AMP