You may have already heard Finance Minister Jim Flaherty has made some changes to mortgage rules governing Insured Mortgages that will become effective July 9, 2012.
The changes include:
- Maximum Amortization will be reduced to 25 years from 30 years
- Maximum amount of equity that homeowners can take out of their homes will be reduced to 80% from 85%
- Government backed mortgags will be limited to homes with a Purchase price of less than $1 million
- Maximum gross debt service ratio will be fixed at 39 % and maximum total debt service will be fixed at 44%
I see these changes as a positive for our market and consumers as very few people realize the tremendous extra cost in extending your amortization those extra 5 years. As an example, on a $300,000 mortgage at 4% interest you save almost $12,000 in just 5 years! If you look at the full term of the mortgage it will save you approximately $40,000! Remember thats after tax earnings you need to pay for that difference! All that for a monthly payment difference of $150.00.
It is important that we understand the positives this brings to our economy as it truly helps everyone in the long run.
Karen
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