Effects of the March 18th Mortgage rules by my friend Jessi Johnson...
Finance Minister Jim Flaherty unveiled changes Monday morning to mortgage lending rules that would see Ottawa stop backing home loans greater than 30 years. There are a lot of unanswered questions that I hope to have answers for tomorrow. I will update this post when I have more info. So what does this mean for the first home buyer?
$50,000 single person or combined family income
$5,000 debt (low average)
$300 monthly strata payments
4% interest rate
30 year amortization
With 5% down ($13,000), this person/family can purchase a condo up to only $260,000. Using a 35 year amortization, this person could buy a condo worth $280,000.
$20,000 is a significant difference when you are purchasing a property in this price range. That is enough to make or break a deal. But what about when the interest rate jumps to only 5%. Now this same person (use a 30 year am) can only buy a condo for $230,000. Or how about if this person wants the historically better variable rate mortgage? Now the purchasing power drops to about $220,000. You can’t buy a closet for that price in Vancouver.