On a federal level the government of Canada has decided that new rules shall be applied to mortgages as of today, July 9th, 2012. Minister Flaherty explains these changes as having the intention to maintain the dream of investing and saving via the home; the dream that mortgage insurance was intended to support. The changes are summarized as follows:
- Amortization period is reduced to 25 years for high ratio applications just a year after their previous reduction from 35 (set in 2008) to 30 years last year in 2011. Banks can continue to offer 30 year amortization on LTV’s 80% or less. This change has the intention to decrease the amount of interest Canadians pay on their mortgage and help build equity in their home.
- Refinancing is reduced from 85% LTV (loan to value ratio) to 80% in order to discourage people from borrowing against their house, and promote saving via equity building.
- The maximum GDS (gross debt service ratio) and TDS (total debt service ratio) will be fixed at 39% and 44%, respectfully, in order to better protect Canadian homes which may be susceptible to events like an economic shock or increase in interest rates.
- Maximum purchase price for government backed mortgage insurance is $1 million. Homes above $1 million must have 20% down payment.
Applications for purchase and sale financing and refinancing agreements made prior to July 9th have exceptions laid to them.
Keep in mind that any application that is made after June 21st and before July 9th which does not conform to the new guidelines above only have until December 31st, 2012 to be fully funded and adhere to the new policies.
For more information contact Sheila Hawkins at 780-707-0808 or firstname.lastname@example.org