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Investors could be hardest hit by amortization cap

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Guest | 12 May 2013, 04:33 PM Agree 0

The proposal is expected to get floated past federally regulated lenders by the Office of the Superintendent of Financial Services as early as this spring, according to sources. It would effectively limit borrowers who put down 20 per cent or more on a property to 25-year term.
That move would represent a sea-change to the 30- and 35-year amortizations that conventional mortgage borrowers are currently able to access in the marketplace.
Flaherty and OSFI are reportedly considering the tighter mortgage rule as a way of further slowing the real estate market, which has already quieted down since Flaherty’s decision last summer to, among other things, reduce the maximum amortization for high-ratio mortgages to 25 years.
This proposed move on conventional is considered by some analysts as a potential overreach by the government and the bank regulator in that conventional mortgages don’t require mortgage insurance and so the backing of federal funds.
It’s a chief reason why any move to reduce the amortization on conventional mortgages would come down as an OSFI guideline and not a direct edict from the ministry of finance.
Even so any move in that direction could increase the carrying costs for small property investors looking to add to their portfolios.
Ostensibly, it would also make it harder for them to come up with the extra cash to renovate those new acquisitions and so increase their cash flow through increased rents.
  • Wes | 14 May 2013, 06:43 PM Agree 0
    Would somebody please bounce this guy (Jim Flaherty) out of office. Thank you.
  • David Yon | 14 May 2013, 11:03 PM Agree 0
    With between 20% and 40% as down payment towards a property, 35 years amortization should be allowed as property would not depreciate like other commodity.
    Thank you.
  • Bryan Jaskolka | 16 May 2013, 01:05 PM Agree 0
    I don't know that he needs bouncing out of office, but this proposed move is too much. He's already quelled the housing market, does he want to make it collapse altogether? That's what will happen if people are forced to come up with massive down payments that are just simply too much for anybody.
  • randy | 21 May 2013, 05:43 PM Agree 0
    the private lenders are just loving all these new rules. the banks have all this cheap money and every time a new rule is put in place the money becomes harder to access. I know I am now paying between 9.6 and 12 % for my last three real estate investment deals because I can't access bank money. cant understand how the banks cant see that I am a good investment if I can turn around and afford to pay these rates. oh well we need at least a situation if you have 50% down that a bank can lend to you no questions asked. the banks would rather lend 95% insured than 80% or less uninsured. maybe the banks should require insurance on every lend so then they never lose.
  • Not Impressed | 21 May 2013, 06:50 PM Agree 0
    Bozo needs to go, it's hard enough for people to buy a home part in thanks to him. If he keeps it up, the market will COLLAPSE and in turn, many jobs will be lost.
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