Mortgage Rule Changes - How they affect you?

 

There has been a lot of discussion about the changes to mortgage rules in the last few days.  What do these changes mean to you?  Well, if you are currently considering buying a new home or refinancing/renewing your current mortgage, it would be a wise move to act before July 9th!

The Federal Government announced last week four new clampdowns on insured mortgages that will quickly come into effect on Monday, July 9th, 2012.

These changes include:

  1. Reducing the maximum amortization period to 25 years from 30 years
  2. Reducing the maximum amount of equity homeowners can take out of their homes when refinancing to 80% from the current 85%
  3. Limiting the availability of government-backed mortgages to homes with a purchase price of less than $1 million
  4. Fixing the maximum gross debt service ratio at 39% and the maximum total debt service ratio at 44%

The first two changes will have the biggest impact on Canadian borrowers.

In Summary these are the timeslines affecting borrowers:

 

Pre-July Rules Apply

New Rules Apply

Mortgage Insurance applications dated before June 22, 2012 with a binding purchase and sale agreement.

x

 

Mortgage Insurance applications date after June 22, 2012 and before July 9, 2012 with a binding purchase and sale agreement and a closing date before December 31, 2012.

x

 

Mortgage Insurance applications date after June 22, 2012 and before July 9, 2012 with a binding purchase and sale agreement and a closing date after December 31, 2012.

 

x

Mortgage Insurance applications taken after July 9, 2012.

 

x

Pre-approval applications with no binding purchase and sale agreement in place outstanding as at July 9, 2012.

 

x

 

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