Okay…I got a tad long winded on this one…get yourself a coffee!
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I mentioned not so long ago that the Federal Government had been rambling on about “they were not afraid to tighten the mortgage rules…AGAIN”. Well, they have done it. As I am sure by now you have heard – there have been some changes…some enhancements.
Let me first take you on a little journey back in time…let’s go back to 2005. The New Conservative Party was in power and ready to make some changes that would have a GREAT BENEFIT to the future of Canadians. They gave us CHEAP and EASY Money with almost no end to our borrowing power. They gave us an eternity to pay it back too! UP TO 40 YEARS! Not to mention – they made it possible for Canadians to buy a home with NO MONEY DOWN (100% Financing)…and they would INSURE it! But wait – it get’s even better…they permitted that we could “STATE OUR INCOME!”…that means we could LIE to their faces…but they didn’t care. This was the dawning of NEW ECONOMIC GROWTH!
They paraded themselves through the streets as “advocates for Free Enterprise” – the FUTURE for Economic Privilege for All Canadians!
I was a little scared when this decision was made…I recall a conversation I had with a new client at that time and we both agreed it was like giving the keys to the family car to the neighbour’s irresponsible kid! Someone didn’t do the math.
In October of 2007 – they (our fearless leaders that is) realized their decision to provide access to this Cheap Money, and the eternity to pay it off, was quite premature and that maybe they (that too would be our fearless leaders) didn’t do enough research on it. They quickly made a Knee Jerk reaction and did away with the 40 year mortgage and the 100% Mortgage Financing…and they started asking for PROOF of our Earnings again.
Everyone got in an uproar. EVERYONE! Borrowers, Lenders, Realtor’s, Mortgage Broker’s, Lawyers, etc. At one point I think even our Neighbour’s irresponsible kid was in the uproar. Even with everyone feeling this “Blow” to the industry…somehow we adapted. Life went on.
Then, last April – the Fed’s stepped in again and this time they said we couldn’t borrower 95% of the value of our house…we could only borrow 90%! They also said we could only purchase up to 2 properties that they would insure…because too many people were buying Revenue and Rental properties under the old rules and that was just not fair for them to buy low and sell high! HOW DARE CANADIANS MAKE MONEY?!! SHAME ON YOU!
Guess what…just like in 2007 – Everyone got in an uproar. Yup – even the neighbour’s irresponsible kid. I hate that kid. But – just like before…we adapted and Life goes on.
Most recently the Fed’s stepped in again and said, “We Need To Get Tougher! We Have Done it Before…We’ll Do it Again – WE AREN’T AFRAID TO TIGHTEN THE RULES FURTHER!”. For those of you keeping score…this was in December 2010. Then in January, while I was away in sunny Orlando (I saw Mickey Mouse!) – our Fearless Leader’s did it again…they said that 35 Years is TOO LONG for Canadian’s to pay off their Mortgages, and said that 90% is TOO MUCH for Canadian’s to borrower against their homes…and also said that “Lines of Credit” are TOO RISKY to be insured.
They are now parading themselves through the streets for being Tough on the Mortgage Industry. They have effectively “marked their territory” as the Watch Dog on Consumer Spending and Borrowing…wait a minute. This must be one of those hidden camera TV shows…they can’t possibly expect us to believe that what just happened was a good thing…THEY WERE THE ONES THAT SET THE STAGE FOR THE INITIAL DISASTER!! They can’t rightfully take credit for cleaning up the mess they spear headed. Do they really think we are that Naive??
Apparently so! And can you guess what’s going to happen? Let me tell you. EVERYONE is going to be in an uproar again…even the neighbour’s irresponsible kid. But, like before, we will adapt – and Life will go on. Don’t worry – we’ll help you along the way.
