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Federal Government Changes to Mortgage Lending


Blog by Alisa Sakamoto | June 27th, 2012


The Federal Government has announced action to restrict mortgage credit. Beginning July 9, 2012 the new mortgage rules will take affect.  The new measures include:

  • The maximum amortization on a prime mortgage will be reduced from 30 to 25 years.
  • Mortgage insurance will not be provided for properties valued over $1 million.
  • Refinancing has been lowered from a maximum of 85% loan-to-value to a maximum of 80% loan-to-value.
  • The maximum gross debt service (GDS) and total debt service (TDS) will be limited to a maximum of 39% and 44% respectively. Currently, GDS does not apply to qualified borrowers with credit scores over 680.

 

How does this affect you?

This affects purchasers with less than 20% down payment

You will now qualify for significantly less

A family with $65,000 in income and no debt with 5% down could previously buy a home for about $525,000.  Now they can only spend about $410,000

*Using today’s 3.09%.

This qualification would be significantly less if you choose a VRM (variable rate mortgage) or term of less than 5 years

For more information, here’s the government’s Q and A document:www.fin.gc.ca/n12/data/12-070_2-eng.asp


If you are considering purchasing a new home or refinancing/renewing your current mortgage, I highly recommend you act before July 9th