Irony of the Mortgage Rule Change…

Matt Chan • August 16, 2012

In June, our Finance Minister, Jim Flaherty, tightened up mortgage rules in Canada to help moderate home purchase spending.  As a quick recap, the new rule changes include:

1) Maximum amortization on insured mortgages has been reduced from 30 years to 25 years

2) Maximum Loan to Value on mortgage refinances is reduced from 85% to 80%

3) Home purchases over $1 million will no longer be eligible for mortgage insurance

I am sure Mr. Flaherty has good intentions when setting these new guidelines.  He is quoted as saying: “It’s a question of trying to moderate behaviour and I hope Canadians will reflect before they jump into a market at the high end,”

There have been numerous articles about increasing debt levels of Canadians:

The irony of the mortgage rule change is that the new refinance rule (ability to refinance only up to 80% reduced from 85%) now restricts and hurts one’s ability to consolidate consumer debt in a refinance.  Here is an example to illustrate my point:

Couple owns a home worth $500,000

Mortgage balance is currently at the 80% threshold of $400,000 (80% LTV)

Couple have $50,000 in credit card debt at an average rate of 15 to 20%.

Under the old rules, couple could have refinanced the mortgage to 85% LTV ($425,000) to help consolidate the credit card debt to reduce the cost of their mortgage debt and to reduce the monthly cashflow to carry the debt.  In fact, under the previous rules, one could refinanced up to 90% which would have been up to $450,000 in our example and thus consolidate the entire debt load.

My point is this: If our government is serious about helping Canadians be more responsible with our consumer debt, then why not address consumer debt.  Why are we restricting homeowners with the ability to consolidate debt with a secured loan against an asset that is generally appreciating (our home!) with minimal interest rate?  Meanwhile, major credit companies are getting away with exorbitant interest rates!

The irony is that it is easy for someone to rack up consumer debt with minimal paperwork yet it is getting more and more challenging to apply for a mortgage.  How hard was it the last time you increased your credit limit on your credit card or when you applied for that car loan/lease? – I am willing to guarantee that it was much much easier than applying for a mortgage.  Consumer debt is one of biggest culprits of our debt crisis here.  Consumer debt is oftentimes the result of impulsive purchases – that shopping spree, that deal on that vehicle you always wanted, etc…  When one realizes that they can no longer afford the financing payments, one then seeks out a refinance.  Unlike a spurn of the moment decision to purchase on credit, a refinance is not an impulsive decision.

Mr. Carney needs to wake up and do something about consumer debt and really leave the mortgage rules alone.

CONTACT

Share

RECENT POSTS

Smart Strategies to Save for Your Down Payment

By Matthew Chan • December 3, 2025
How to Start Saving for a Down Payment (Without Overhauling Your Life) Let’s face it—saving money isn’t always easy. Life is expensive, and setting aside extra cash takes discipline and a clear plan. Whether your goal is to buy your first home or make a move to something new, building up a down payment is one of the biggest financial hurdles. The good news? You don’t have to do it alone—and it might be simpler than you think. Step 1: Know Your Numbers Before you can start saving, you need to know where you stand. That means getting clear on two things: how much money you bring in and how much of it is going out. Figure out your monthly income. Use your net (after-tax) income, not your gross. If you’re self-employed or your income fluctuates, take an average over the last few months. Don’t forget to include occasional income like tax returns, bonuses, or government benefits. Track your spending. Go through your last 2–3 months of bank and credit card statements. List out your regular bills (rent, phone, groceries), then your extras (dining out, subscriptions, impulse buys). You might be surprised where your money’s going. This part isn’t always fun—but it’s empowering. You can’t change what you don’t see. Step 2: Create a Plan That Works for You Once you have the full picture, it’s time to make a plan. The basic formula for saving is simple: Spend less than you earn. Save the difference. But in real life, it’s more about small adjustments than major sacrifices. Cut what doesn’t matter. Cancel unused subscriptions or set a dining-out limit. Automate your savings. Set up a separate “down payment” account and auto-transfer money on payday—even if it’s just $50. Find ways to boost your income. Can you pick up a side job, sell unused stuff, or ask for a raise? Consistency matters more than big chunks. Start small and build momentum. Step 3: Think Bigger Than Just Saving A lot of people assume saving for a down payment is the first—and only—step toward buying a home. But there’s more to it. When you apply for a mortgage, lenders look at: Your income Your debt Your credit score Your down payment That means even while you’re saving, you can (and should) be doing things like: Building your credit score Paying down high-interest debt Gathering documents for pre-approval That’s where we come in. Step 4: Get Advice Early Saving up for a home doesn’t have to be a solo mission. In fact, talking to a mortgage professional early in the process can help you avoid missteps and reach your goal faster. We can: Help you calculate how much you actually need to save Offer tips to strengthen your application while you save Explore alternate down payment options (like gifts or programs for first-time buyers) Build a step-by-step plan to get you mortgage-ready Ready to get serious about buying a home? We’d love to help you build a plan that fits your life—and your goals. Reach out anytime for a no-pressure conversation.

Everything You Need to Know About Second Mortgages

By Matthew Chan • November 26, 2025
What Is a Second Mortgage, Really? (It’s Not What Most People Think) If you’ve heard the term “second mortgage” and assumed it refers to the next mortgage you take out after your first one ends, you’re not alone. It’s a common misconception—but the reality is a bit different. A second mortgage isn’t about the order of mortgages over time. It’s actually about the number of loans secured against a single property —at the same time. So, What Exactly Is a Second Mortgage? When you first buy a home, your mortgage is registered on the property in first position . This simply means your lender has the primary legal claim to your property if you ever sell it or default. A second mortgage is another loan that’s added on top of your existing mortgage. It’s registered in second position , meaning the lender only gets paid out after the first mortgage is settled. If you sell your home, any proceeds go toward paying off the first mortgage first, then the second one, and any remaining equity is yours. It’s important to note: You still keep your original mortgage and keep making payments on it —the second mortgage is an entirely separate agreement layered on top. Why Would Anyone Take Out a Second Mortgage? There are a few good reasons homeowners choose this route: You want to tap into your home equity without refinancing your existing mortgage. Your current mortgage has great terms (like a low interest rate), and breaking it would trigger hefty penalties. You need access to funds quickly , and a second mortgage is faster and more flexible than refinancing. One common use? Debt consolidation . If you’re juggling high-interest credit card or personal loan debt, a second mortgage can help reduce your overall interest costs and improve monthly cash flow. Is a Second Mortgage Right for You? A second mortgage can be a smart solution in the right situation—but it’s not always the best move. It depends on your current mortgage terms, your equity, and your financial goals. If you’re curious about how a second mortgage could work for your situation—or if you’re considering your options to improve cash flow or access equity—let’s talk. I’d be happy to walk you through it and help you explore the right path forward. Reach out anytime—we’ll figure it out together.

Your Guide to Successfully Navigating the Housing Market

By Matthew Chan • November 19, 2025
Wondering If Now’s the Right Time to Buy a Home? Start With These Questions Instead. Whether you're looking to buy your first home, move into something bigger, downsize, or find that perfect place to retire, it’s normal to feel unsure—especially with all the noise in the news about the economy and the housing market. The truth is, even in the most stable times, predicting the “perfect” time to buy a home is incredibly hard. The market will always have its ups and downs, and the headlines will never give you the full story. So instead of trying to time the market, here’s a different approach: Focus on your personal readiness—because that’s what truly matters. Here are some key questions to reflect on that can help bring clarity: Would owning a home right now put me in a stronger financial position in the long run? Can I comfortably afford a mortgage while maintaining the lifestyle I want? Is my job or income stable enough to support a new home? Do I have enough saved for a down payment, closing costs, and a little buffer? How long do I plan to stay in the property? If I had to sell earlier than planned, would I be financially okay? Will buying a home now support my long-term goals? Am I ready because I want to buy, or because I feel pressure to act quickly? Am I hesitating because of market fears, or do I have legitimate concerns? These are personal questions, not market ones—and that’s the point. The economy might change tomorrow, but your answers today can guide you toward a decision that actually fits your life. Here’s How I Can Help Buying a home doesn’t have to be stressful when you have a plan and someone to guide you through it. If you want to explore your options, talk through your goals, or just get a better sense of what’s possible, I’m here to help. The best place to start? A mortgage pre-approval . It’s free, it doesn’t lock you into anything, and it gives you a clear picture of what you can afford—so you can move forward with confidence, whether that means buying now or waiting. You don’t have to figure this out alone. If you’re curious, let’s talk. Together, we can map out a homebuying plan that works for you.