The Canadian government formally announced changes to mortgage insurance rules which will take effect on July 9, 2012 for new mortgages originated.
There are 4 changes in total regarding government-backed insured mortgages:
- The maximum amortization period is reduced to 25 years from 30 years;
- The maximum refinancing loan-to-value is reduced to 80% from 85%;
- The maximum debt service ratios are capped at 39% for the gross debt service ratio and 44% for the total debt service ratio; and
- Government-back insured mortgages will only be available for mortgages on homes with purchase prices under $1 million (previously no limit).
NOTE: These changes only apply (thus far) to CMHC insured mortgages (mortgages greater than 80% of the value of the home).