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)