Any plans to lower the amortization cap on insured mortgages should exempt clients looking to maximize cash flow but well able to qualify for 25-year terms, says one broker lobbying for the exception.
“We’re probably taking about a small percentage of buyers, but a significant group nonetheless,” Justin Blacklock, a mortgage manager at The Mortgage Group - Averbach Mortgages, told MortgageBrokerNews.ca. “It would be unfair to penalize those sophisticated, well-heeled clients who just want to take money that would otherwise go toward their mortgage and invest it elsewhere. They clearly have the means to pay.”
The Vancouver mortgage professional is among the first to suggest the government duplicate a move last made in April 2010 when it changed the qualifying standard for insured, high-ratio borrowing to a five-year posted rate.
That, nonetheless, allows borrowers to go with a discounted rate.
Blacklock’s suggestion around amortization would work the same by forcing clients to qualify using the 25-year amortization, but giving them the lattitude to stay with the current 30-year mortgage. Most analysts and, increasingly, bank economists, predict the government will officially move to that 25-year cap if, in fact, consumer debt levels fail to ease.
“For the borderline client -- a less than stellar client -- I guess I understand the need to do that,” said Blacklock, “but several clients don’t represent that level of risk, and all they’re looking to do is maximize their cash flow. It’s easy to talk about scaling back to 25 years when you’re not living in Vancouver.”
Still, under Blacklock’s plan all borrowers would still be made to meet that 25-year cap. It means middle-class families on the Lower Mainland would still face the challenge of gaining a foothold in large parts of Vancouver.
That’s one reason why broker organizations continue to ramp up efforts to block any government attempt to lower that amortization ceiling.
“The government removing that option would really only reduce their cash flow and force them to put money into a mortgage instead of investing in other areas,” said Peter Puzzo, a mortgage agent with Assured Mortgage in Woodbridge, Ont. “I’m not sure that would send a good message to consumers.”