So, unfortunately I didn’t take a picture before the holidays of this local credit union sign – but it did read “Need Money for Christmas – come see us!” Obviously promoting taking out a line of credit or loan and thus borrowing for holiday shopping. Interestingly enough, the same credit union after Christmas changes their sign to this – “Christmas Debt, We can Help!” Unbelievable – the same people that put you into unnecessary debt for Christmas, now want you to come to them for a consolidation loan. This is the type of behaviour that has to stop. The “Stuff Debt” is what can get out of control. Watch your credit cards, unsecured debt, car loans, etc. if you are borrowing on credit to buy a non-appreciating asset, think twice – especially if it’s for Christmas shopping.

Mortgage rules change again… The maximum amortization for insured mortgages will be reduced to 30 years. The maximum amount you can borrow to re-finance your home will change to 85% loan to value. The changes only affect insured (CMHC) mortgages and not until March 18th 2011.

So, what does this mean? It actually is not a bad idea to keep more equity in your home as a safety net. You could find yourself in a negative equity situation refinancing up to 90% of the value of your home, especially if you plan to sell in the near future.  Having a shorten amortization (from 35 to 30 years) is only affecting a $200,000 mortgage by an increased payment of only $70 per month. As well, by chosing the lower 30 year amortization you owe about $5,000 less in 5 years. That’s huge savings over the life of a mortgage.

Although some in our industry will be disappointed with the rules, for now the government has left down payments at 5% minimum. Also given that we are in a country with the safest credit and banking industry, I welcome the new rules.

The details of the announcement can be found here.