Mortgage Rules Change for the 4th Time ....




Mortgage Rules Change Again, for the 4th Time



As of July 9, 2012 the 4th round of mortgage rule changes will take effect in Canada. These rules apply to government-backed mortgages that require default insurance.

Mortgages with an 80% loan-to-value or a 20% downpayment are considered conventional mortgages and do not require default insurance. Mortgages with less than 20% down must carry default insurance.

The Government has announced 4 measures for “new government-backed insured mortgages:

  • The maximum amortization has been reduced to 25 years. It has gone from 40 years to 35 years in 2008 and then to 30 years in 2011.
  • The maximum that can be borrowed for refinancing one’s home has been lowered to 80% from 85% of the home’s value.
  • Maximum debt service ratios will be fixed as follows:

--39% for gross debt service ratio—this accounts for housing costs that include principal, interest, taxes and heat (PITH), and

--44% for total debt service ratio—this accounts for housing costs plus all other debt payments (car loans or leases, credit card payments, lines of credit payments, etc.).

  • Limit government-back insurance to homes with a purchase price of less than $1,000,000.

(Source: Department of Finance Canada; June 21, 2012)

Allan Lent

Allan Lent

Sales Representative
CENTURY 21 Today Realty Ltd., Brokerage*
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