Thursday, February 18, 2010

Rules can be bent

How effective will the new mortgage rule changes instituted by Finance Minister Jim Flaherty this week be?

Well... when you consider that, under the old rules, the mandatory 5% downpayment was openly flaunted by banks who advertised on their websites that they would give you 5% back for taking out the mortgage with them (thus eliminating the 5% down requirement); what do you think?

Me too.

And the media is openly telling buyers, "Don't worry, home loan rules can still be bent."

"It's not a huge deal," said Benjamin Tal, a senior economist with CIBC World Markets. "It was a balancing act for the government, which wants to be seen as responding to the mortgage market but not derailing it."

Ah yes... the government wants to be 'seen as responding'. Image is everything.

The real-estate industry was clearly worried about the possibility of down payments rising to 10% and amortization shrinking to 25 years. That would have had an impact. But these changes? Pfffft.

As the Vancouver Sun notes, "one financial institution was still advertising last week its offer to pay the 5% minimum down payment on your behalf... the banks will also let you tack on your mortgage insurance costs on top of your loan, meaning you can get a mortgage for almost 98% of the value of your property."

Nothing has changed. And if you need a little more income than you did last week to qualify for that loan, have no fear - I can almost guarantee there will be strategies coming out to let you deal with that.

A little deja-vu circa USA in 2006?


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