The Federal government recently announced new measures with respect to new government- backed insured mortgages.
There were two significant changes:
- The value of the mortgage cannot be more than 80% of the value of the home and property against which it is issued. This used to be 90%.
- The term over which the loan is amortized has been reduced from 30 years to 25 years.
What this likely means for some homeowners who have to renew their mortgages, is that they will face larger monthly mortgage payments. They may not be able to support these if they have other debts, such as lines of credit or credit cards on which they are making monthly payments. In addition, they may not have sufficient equity in their homes to qualify for the 80% threshold.
In these situations it’s possible that a Licensed Insolvency Trustee can help them by re-organizing their other debts through a Consumer Proposal, so that they land up settling those debts for as low as 30 cents on the dollar.
The money freed up in this process can be used to support the higher mortgage payments.