Finance: Financial Stability for Homeowners

On February 16, Finance Minister Jim Flaherty, announced new measures to encourage and support the long-term stability of Canadian home ownership and its vital place in the Canadian economy, with measures proposed to come into force on April 19, 2010. These changes are of particular importance to wealth advisors working today with families who build wealth through home ownership.

"A key lesson of the global financial crisis is that early policy action can help prevent negative trends from developing," said the Finance Minister in adjusting three rules for government-backed insured mortgages:

• To prepare for higher interest rates in the future, the government will require all borrowers to meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term.
• To ensure the effectiveness of using home ownership in savings activities, the government will lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 percent from 95 percent of the value of their homes.
• To manage risk, the government will require a minimum down payment of 20 percent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.

The measures are intended to proactively help prevent Canadian households from getting overextended, ". . .and to prevent some lenders from facilitating it," said Minister Flaherty.

Suggested Educational Resources: "Pass it Onî A workbook on intergenerational property transfers by John Poyser and Evelyn Jacks or the January 2010 Line by Line Tax Update Journal.