A move by the federal government to further tighten mortgage rules to address concerns over high Canadian household debt is getting mixed reviews in Nova Scotia.
The most important new change is that the maximum amortization period has been reduced to 25 years, down from 30. The longer a mortgage is spread out, the lower the monthly mortgage payments are — but the more the borrower ends up paying overall over time.
A shorter amortization period demands higher payments, but it will also mean homeowners build up equity in their homes faster.
Stephanie Holmes-Winton, a Halifax-based financial officer, said she sees the changes as short-term pain for long-term gain.
"It's going to force you maybe to save for longer and because of the changes in mortgage rules, we may actually see fewer new homebuyers for a little while, which actually could reduce prices," she said Thursday.
Under the new rules, buyers who purchase a home with a down payment of less than 20 per cent of its value are required to purchase government-backed mortgage insurance through Canada Mortgage and Housing Corporation.
Mortgages amortized over a period longer than 25 years will no longer qualify for that insurance, making it effectively impossible to get a highly leveraged mortgage of more than 25 years in Canada.
Some realtors said the new rules mean some first-time buyers may be shut out from the housing market.
Clinton Wilkins, a mortgage professional with Centum Home Lenders Ltd., said he sees the changes as a double whammy.
"Clients are going to have a difficult time borrowing and qualifying and it's going to have a negative impact on real estate prices and on first time homebuyers, so there's going to be more people who are going to be looking to rent and less people who are going to be able to buy," he told CBC News.
"It's threatening home ownership in Canada, in my opinion."
Roy Thomas, a realtor with Exit Realty, said he doesn't expect the changes to make much of a difference.
"They're basically lowering what people can afford to buy at their maximum purchase price," he said.
"Your payment will rise a little bit and that will therefore decrease slightly the amount of house you qualify for. The good thing though is you're going to have your house paid off five years sooner and save tens of thousands of dollars in interest."
The announcement marks the fourth time in four years that the government has clamped down on mortgage rules.
The latest changes go into effect July 9.