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- Sep 14, 2007
- Messages
- 617
What New Rules? Higher Ground Was Already Playing Buy Them!
WRITTEN BY WADE GRAHAM | 16 FEBRUARY 2010
The Finance Minister Jim Flaherty announced some new rules today that will have a huge impact on the market and most of all the rental market!
Here is the press release from the government:
The Honourable Jim Flaherty, Minister of Finance, today announced a number of measured steps to support the long-term stability of Canada`s housing market and continue to encourage home ownership for Canadians.
"Canada`s housing market is healthy, stable and supported by our country`s solid economic fundamentals," said Minister Flaherty. "However, a key lesson of the global financial crisis is that early policy action can help prevent negative trends from developing."
The Government will therefore adjust the rules for government-backed insured mortgages as follows:
Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future.
Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes. This will help ensure home ownership is a more effective way to save.
Require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.
"There`s no clear evidence of a housing bubble, but we`re taking proactive, prudent and cautious steps today to help prevent one. Our Government is acting to help prevent Canadian households from getting overextended, and acting to help prevent some lenders from facilitating it," said Minister Flaherty. "If some lenders aren`t willing to act themselves, we will act. These measures demonstrate the Government is committed to taking action when necessary to support the long-term stability of a sector that is so vital to our economy and the financial well-being of Canadian families."
These adjustments to the mortgage insurance guarantee framework are intended to come into force on April 19, 2010.
Wow! These are some relatively big changes! Now what does this mean for most investors.
For starters, most investors want to put as little down as possible and this rule has just shut the door on that practice. Unfortunately, most investors don`t feel like they can raise the capital now needed to purchase rental property. For Higher Ground we have always put a full 20% down to avoid costly CMHC fees and create a healthy portfolio.....it just made sense!
Properties will now be analyzed at the 5 year fixed rate. This effects everyone and not just investors. Again we always run our projected numbers at the 5 year rate or higher! So again no change for us and it is business as usual but for Canadians that are just barely getting in at today`s numbers this is a great rule and one I fully support. There will come a time when rates go up and this will prevent those people from getting in over their heads.
The refinancing rule will also hold back some investors especially those who are pulling all of the capital from their homes to buy rental property (or more likely a fancy car). We have always told our investors that are using HELOCs or LOCs that we don`t want their last $5000. If you are pushing it that close to the line any investment will be stressful for you and this isn`t a fun place to be. I believe this is a prudent step for the Government but for the most part it won`t have too much effect on the market and simply force people to save some money for a rainy day......a good thing!
What do all of these changes mean to the rental market? As I stated in a previous post, this will remove a lot of the rental inventory from the market and force rents up!! Like it or not this is what will happen as it is simple supply and demand economics. With fewer investors able to buy rental property and more people having to rent because of the rule changes I predict we will see a sharp increase in rents in the next year. Great for investors.....not so great for renters.
In conclusion, Higher Ground has been following the above guidelines since our first Joint Venture Partnership and the rules will have little effect on us but for the investment market as a whole you could see some speculators very unhappy about these changes! We won`t be one of them!!
WRITTEN BY WADE GRAHAM | 16 FEBRUARY 2010
The Finance Minister Jim Flaherty announced some new rules today that will have a huge impact on the market and most of all the rental market!
Here is the press release from the government:
The Honourable Jim Flaherty, Minister of Finance, today announced a number of measured steps to support the long-term stability of Canada`s housing market and continue to encourage home ownership for Canadians.
"Canada`s housing market is healthy, stable and supported by our country`s solid economic fundamentals," said Minister Flaherty. "However, a key lesson of the global financial crisis is that early policy action can help prevent negative trends from developing."
The Government will therefore adjust the rules for government-backed insured mortgages as follows:
Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future.
Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes. This will help ensure home ownership is a more effective way to save.
Require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.
"There`s no clear evidence of a housing bubble, but we`re taking proactive, prudent and cautious steps today to help prevent one. Our Government is acting to help prevent Canadian households from getting overextended, and acting to help prevent some lenders from facilitating it," said Minister Flaherty. "If some lenders aren`t willing to act themselves, we will act. These measures demonstrate the Government is committed to taking action when necessary to support the long-term stability of a sector that is so vital to our economy and the financial well-being of Canadian families."
These adjustments to the mortgage insurance guarantee framework are intended to come into force on April 19, 2010.
Wow! These are some relatively big changes! Now what does this mean for most investors.
For starters, most investors want to put as little down as possible and this rule has just shut the door on that practice. Unfortunately, most investors don`t feel like they can raise the capital now needed to purchase rental property. For Higher Ground we have always put a full 20% down to avoid costly CMHC fees and create a healthy portfolio.....it just made sense!
Properties will now be analyzed at the 5 year fixed rate. This effects everyone and not just investors. Again we always run our projected numbers at the 5 year rate or higher! So again no change for us and it is business as usual but for Canadians that are just barely getting in at today`s numbers this is a great rule and one I fully support. There will come a time when rates go up and this will prevent those people from getting in over their heads.
The refinancing rule will also hold back some investors especially those who are pulling all of the capital from their homes to buy rental property (or more likely a fancy car). We have always told our investors that are using HELOCs or LOCs that we don`t want their last $5000. If you are pushing it that close to the line any investment will be stressful for you and this isn`t a fun place to be. I believe this is a prudent step for the Government but for the most part it won`t have too much effect on the market and simply force people to save some money for a rainy day......a good thing!
What do all of these changes mean to the rental market? As I stated in a previous post, this will remove a lot of the rental inventory from the market and force rents up!! Like it or not this is what will happen as it is simple supply and demand economics. With fewer investors able to buy rental property and more people having to rent because of the rule changes I predict we will see a sharp increase in rents in the next year. Great for investors.....not so great for renters.
In conclusion, Higher Ground has been following the above guidelines since our first Joint Venture Partnership and the rules will have little effect on us but for the investment market as a whole you could see some speculators very unhappy about these changes! We won`t be one of them!!
