Canada bans zero money down mortgages, amortization periods longer than 35 years

[yllus]

CMHC pulls plug on zero-down mortgage

The federal government has cracked down on the mortgage industry with new rules that will make it more difficult for consumers to borrow. But many market observers think it is too little too late.

One of the key measures is a requirement that all mortgages have at least a 5% down payment. Competition in the mortgage industry has allowed consumers to put zero money down on a home and still get a competitive rate.

The government's other key measure is to introduce a stipulation that insured mortgage products have an amortization period of no longer than 35 years. In the past two years, the amortization period has stretched from 25 years to as much as 40, with some people suggesting a 50-year amortization was next.

Any consumer with less than a 20% down payment on a home is required to get mortgage insurance if they are borrowing money from a financial institution covered by the Bank Act. The new rules affect those mortgages.

The government will also require anybody with an insured mortgage product to have a minimum credit score.

The new rules will also require new loan documentation standards.

Ottawa insisted the housing market is in fine shape and noted the number of mortgages in arrears is stable at 0.27%, near the lowest levels experienced since 1990.

But the government does have some concerns about the market getting overheated. It was two years ago that former Bank of Canada governor David Dodge complained that interest-only mortgages were adding too much fuel to the housing market. At the time, he demanded a meeting with Canada Mortgage and Housing Corp to discuss the issue.

I see these measures as being good optically in front of the press, but not really having much impact on the problem. The difference between a 35 year amortization period versus a 40 year one isn't going to be much. The zero money down ban might be more useful, though.

 

[Atreus21]

This is idiocy.

 

[sandorski]

Canada, as far as I know, hasn't had the same problems regarding mortgages as the US has had/is having. I see this as just an attempt to prevent US type of problems. Good move.

 

[Atreus21]

Originally posted by: sandorski
Canada, as far as I know, hasn't had the same problems regarding mortgages as the US has had/is having. I see this as just an attempt to prevent US type of problems. Good move.

Well, my opinion is hugely biased. I'm getting into real-estate investing, and 100% financing is very valuable. If I can get a house with no money down, I can maximize the return on investment versus my amount invested.

The idea was that, having put no cash of my own into it, I could rent the place out, and be making a profit, using the banks money. Making 5% down compulsory is discouraging to investors like me.

 

[LegendKiller]

Originally posted by: Atreus21

Originally posted by: sandorski
Canada, as far as I know, hasn't had the same problems regarding mortgages as the US has had/is having. I see this as just an attempt to prevent US type of problems. Good move.

Well, my opinion is hugely biased. I'm getting into real-estate investing, and 100% financing is very valuable. If I can get a house with no money down, I can maximize the return on investment versus my amount invested.

The idea was that, having put no cash of my own into it, I could rent the place out, and be making a profit, using the banks money. Making 5% down compulsory is discouraging to investors like me.

Gawd, doesn't it just suck to have to put your own money at risk when speculating on an investment.

 

[sandorski]

Originally posted by: LegendKiller

Originally posted by: Atreus21

Originally posted by: sandorski
Canada, as far as I know, hasn't had the same problems regarding mortgages as the US has had/is having. I see this as just an attempt to prevent US type of problems. Good move.

Well, my opinion is hugely biased. I'm getting into real-estate investing, and 100% financing is very valuable. If I can get a house with no money down, I can maximize the return on investment versus my amount invested.

The idea was that, having put no cash of my own into it, I could rent the place out, and be making a profit, using the banks money. Making 5% down compulsory is discouraging to investors like me.

Gawd, doesn't it just suck to have to put your own money at risk when speculating on an investment.

hehe

 

[PokerGuy]

Originally posted by: Atreus21

Originally posted by: sandorski
Canada, as far as I know, hasn't had the same problems regarding mortgages as the US has had/is having. I see this as just an attempt to prevent US type of problems. Good move.

Well, my opinion is hugely biased. I'm getting into real-estate investing, and 100% financing is very valuable. If I can get a house with no money down, I can maximize the return on investment versus my amount invested.

The idea was that, having put no cash of my own into it, I could rent the place out, and be making a profit, using the banks money. Making 5% down compulsory is discouraging to investors like me.

That's exactly the point. I think investors like you, along with those who buy a home but can't really afford it, is exactly who they are targetting, they are a significant part of the problem we've seen with the housing market bubble.

 

[PokerGuy]

double post

 

[PokerGuy]

triple post, sorry!

 

[aldamon]

Originally posted by: PokerGuyThat's exactly the point. I think investors like you, along with those who buy a home but can't really afford it, is exactly who they are targetting, they are a significant part of the problem we've seen with the housing market bubble.

I blame HGTV. 🙂

 

[cliftonite]

Originally posted by: LegendKiller

Originally posted by: Atreus21

Originally posted by: sandorski
Canada, as far as I know, hasn't had the same problems regarding mortgages as the US has had/is having. I see this as just an attempt to prevent US type of problems. Good move.

Well, my opinion is hugely biased. I'm getting into real-estate investing, and 100% financing is very valuable. If I can get a house with no money down, I can maximize the return on investment versus my amount invested.

The idea was that, having put no cash of my own into it, I could rent the place out, and be making a profit, using the banks money. Making 5% down compulsory is discouraging to investors like me.

Gawd, doesn't it just suck to have to put your own money at risk when speculating on an investment.

Nice 🙂

 

[Engineer]

Originally posted by: aldamon

Originally posted by: PokerGuyThat's exactly the point. I think investors like you, along with those who buy a home but can't really afford it, is exactly who they are targetting, they are a significant part of the problem we've seen with the housing market bubble.

I blame HGTV. 🙂

Showing how glamorous it can be to flip a home, I have no doubt that the shows on HGTV did indeed help drive home prices up and up as more and more people thought that they could makes hundreds of thousands of dollars in just a few months time.

 

[GoPackGo]

Originally posted by: Engineer

Originally posted by: aldamon

Originally posted by: PokerGuyThat's exactly the point. I think investors like you, along with those who buy a home but can't really afford it, is exactly who they are targetting, they are a significant part of the problem we've seen with the housing market bubble.

I blame HGTV. 🙂

Showing how glamorous it can be to flip a home, I have no doubt that the shows on HGTV did indeed help drive home prices up and up as more and more people thought that they could makes hundreds of thousands of dollars in just a few months time.

Didn't you know...most of those shows are lies and fraud

 

[CanOWorms]

I'll investigate whether there is any link to the Queen on this one.

 

[Thump553]

Amortization schedules over thirty years are extremely uncommon in the US-the lender would not be able to sell that loan on the secondary market. In any event, the difference in monthly payments between a thirty year and a forty year amortization on a home mortgage is pretty miniscule.

We still have near zero money down mortgages but the loan standards have been extremely tightened up.

 

[chrisho]

Originally posted by: Atreus21

Originally posted by: sandorski
Canada, as far as I know, hasn't had the same problems regarding mortgages as the US has had/is having. I see this as just an attempt to prevent US type of problems. Good move.

Well, my opinion is hugely biased. I'm getting into real-estate investing, and 100% financing is very valuable. If I can get a house with no money down, I can maximize the return on investment versus my amount invested.

The idea was that, having put no cash of my own into it, I could rent the place out, and be making a profit, using the banks money. Making 5% down compulsory is discouraging to investors like me.

I think that their changes in Canada will put more people into renting and lead back to the problem the US government was trying to fix where they will be required to flip the laws yet again to get people into homes again.

 

[Slew Foot]

Originally posted by: chrisho

Originally posted by: Atreus21

Originally posted by: sandorski
Canada, as far as I know, hasn't had the same problems regarding mortgages as the US has had/is having. I see this as just an attempt to prevent US type of problems. Good move.

Well, my opinion is hugely biased. I'm getting into real-estate investing, and 100% financing is very valuable. If I can get a house with no money down, I can maximize the return on investment versus my amount invested.

The idea was that, having put no cash of my own into it, I could rent the place out, and be making a profit, using the banks money. Making 5% down compulsory is discouraging to investors like me.

I think that their changes in Canada will put more people into renting and lead back to the problem the US government was trying to fix where they will be required to flip the laws yet again to get people into homes again.

Theres a huge difference between getting people into homes, and getting people into places they can afford to live in.

 

[Engineer]

Originally posted by: GoPackGo


Didn't you know...most of those shows are lies and fraud

No, I didn't know. I always thought that they selectively chose the shows that had the best flip (i.e. most money returned on investment). How are/were they lies and fraud?

 

[newnameman]

Originally posted by: Engineer

Originally posted by: GoPackGo


Didn't you know...most of those shows are lies and fraud

No, I didn't know. I always thought that they selectively chose the shows that had the best flip (i.e. most money returned on investment). How are/were they lies and fraud?

Text

 

[Jhhnn]

Yeh- damned Canadians are paying down their governmental debt, too, raising the value of the Loonie and planning for their futures.

Rotten socialist bastids are depriving enterpreneurial spirits like Atreus21 from makin' money out of nothin', too... It's a shame and a horror show, I tell ya'...

 

[charrison]

I think this is quite unfortunate. While zero down home loans do carry more risk, but they still should be allowed for individuals that have enough credit/income to handle it.

For those with good income/credit they can get into a house sooner and not have to pay rent while trying to save 20% to get into a house. But I will say such loans should be given out quite selectively.

 

[Engineer]

Originally posted by: newnameman

Originally posted by: Engineer

Originally posted by: GoPackGo


Didn't you know...most of those shows are lies and fraud

No, I didn't know. I always thought that they selectively chose the shows that had the best flip (i.e. most money returned on investment). How are/were they lies and fraud?

Text

So one show = all lied and are fraud?

 

[Orignal Earl]

Originally posted by: CanOWorms
I'll investigate whether there is any link to the Queen on this one.

lol

God Bless the Queen

 

[Double Trouble]

Originally posted by: charrison
I think this is quite unfortunate. While zero down home loans do carry more risk, but they still should be allowed for individuals that have enough credit/income to handle it.

For those with good income/credit they can get into a house sooner and not have to pay rent while trying to save 20% to get into a house. But I will say such loans should be given out quite selectively.

Someone who has such "good income/credit" should be able to come up with 5% to make a down payment, wouldn't you think? It's basically trying to force some common sense into the lending process to protect the community at large.

 

[jman19]

Originally posted by: LegendKiller

Originally posted by: Atreus21

Originally posted by: sandorski
Canada, as far as I know, hasn't had the same problems regarding mortgages as the US has had/is having. I see this as just an attempt to prevent US type of problems. Good move.

Well, my opinion is hugely biased. I'm getting into real-estate investing, and 100% financing is very valuable. If I can get a house with no money down, I can maximize the return on investment versus my amount invested.

The idea was that, having put no cash of my own into it, I could rent the place out, and be making a profit, using the banks money. Making 5% down compulsory is discouraging to investors like me.

Gawd, doesn't it just suck to have to put your own money at risk when speculating on an investment.

Ouch! :laugh: