The Government of Canada is trying to get the message across to consumers that you need to tread carefully when you take out a mortgage. It has become much harder to get approved for a mortgage in Canada, especially with the new mortgage rules that were implemented last summer. This was part of an overall message that the government was trying to send out to potential mortgage owners. The idea is to be certain about your commitment before signing anything on the dotted line.The Canadian Real Estate Association chief economist, Gregory Klump, agrees that the Canadian government is trying to get consumers to take a second look at the reality of getting a mortgage. This is especially true for first-time home buyers that tend to apply for mortgages with a high ratio. A high ratio mortgage is one with a down payment that is lower than 20%. With this type of mortgage the borrower must take out default insurance according to federal law.
As a result, Canadian consumers are getting more educated and doing more research about home purchases than they ever have been before. First-time buyers are taking the time to ask questions and read through information, especially on the Internet, about the responsibilities and implications that go along with a mortgage and home ownership.
The government has set things up so that it is more difficult for a young couple that is just starting out to buy a home that they simply cannot afford. Last year, when the new rules were implemented for mortgages, many potential homebuyers had to take a step back and really examine the affordability factor. It wasn't only the mortgage monthly payments that needed to be addressed but the closing costs, utility expenses, insurance and the overall monthly budget expenses that would need to be paid.
Is this is a good thing? While many people think that the government is just stepping on toes again and putting in provisions that are limiting homebuyers from stepping into the real estate world, others take a look at what has happened in the United States recently and know that Ottawa is merely trying to protect Canadian real estate the best way it knows how.