Changes to Insured Mortgages

Changes made by Finance Minister Jim Flaherty with regards to "insured mortgages". These changes do not apply to conventional (unisured) mortgages and it is too early to know how the lenders will modify their underwriting guidelines.

The following changes have been made effective July 9th, 2012: 

. reduce the maximum amortization period to 25 years from 30 years.
. The maximum amount of equity homeowners can take out of their homes in a refinancing is being reduced to 80 per cent from 85 percent.
. The availability of government-backed mortgages will be limited to homes with a purchase price of less than $1-million
. The maximum gross debt service ratio will be fixed at 39 per cent and the maximum total debt service ratio at 44 per cent.

NOTE: Your client does not have to take possession before July 9th, they only have to have a live approval in place before that date.

The biggest changes that will effect you as the consumer are the decreased amortization and gross debt service ratios. Here is an example of how this will change your client's affordability.

Currently:

Mortgage amount = $300,000

Required income = $43,000

 

After July 9th:

Mortgage amount = $300,000

Required income = $53,000

 

To put it another way an annual income of $43,000 now only qualifies for a mortgage amount of $235,000, down from $300,000

 NOTE:

These calculations assume there is no consumer debt. (this is unlikely)

5 year fixed at 3.09% was used to qualify

Rates are subject to change without notice

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Catherine Ta

Catherine Ta

Affiliated Real Estate Agent
CENTURY 21 Vantage Realty Ltd.
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