Just last week the federal government made the announcement that the mortgage rules are once again being tightened. This is the third time in four years, as we have all seen the period of amortization decrease from 40, to 35, to 30 and now back to 25 years. Canadian homebuyers are also being urged to keep more equity in their homes with the government decreasing the maximum amount that can be borrowed against a home to 80% of its value. These tactics are actions the government can use in order to avoid raising interest rates, which ultimately would negatively affect far more homeowners.
So what does this mean for you? At first these new rules may sound alarming, especially in a city where we all struggle with affordability. However, if you actually take a quick look at the numbers, the announcement does not drastically affect your borrowing power, but rather encourages homebuyers to really take a look at their budgets and be mindful of the dollars they are spending.
Furthermore, although the reduced amortization period will increase monthly payments, the great news is that there will be an overall savings of the interest paid which means more money in your pocket at the end of the day.
From a home buying perspective, we do not expect this announcement to drastically alter buying behavior, given that these changes only really affect a very small portion of the home buying population. In fact, these new rules are actually good for us all. These difficult decisions made by the government continue to help Canada have one of the strongest banking systems in the world, position us positively in a global setting and assist in maintaining economic prosperity for us all.
Cameron McNeill
Mortgage Amount
Interest Rate
Interest paid over 30 years
Monthly Payment
Interest paid over 25 years
Monthly Payment
Additional Monthly Cost
Interest Savings
$250,000
3.95%
$174,788
$1087
$142,035
$1203
$116
$32,753
$300,000
3.95%
$209,744
$1304
$168,714
$1444
$139
$41,031
$350,000
3.95%
$244,701
$1522
$198,848
$1684
$162
$45,852
$400,000
3.95%
$279,657
$1739
$227,253
$1925
$186
$52,404
$450,000
3.95%
$314,617
$1957
$255,661
$2165
$209
$58,952
*Based on a 3.95% interest rate and bi-weekly payments. All calculations are approximate. See a mortgage specialist for more information.
