The Canadian government has annouced that there will be big changes made to the mortgage rules, 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.
These changes are being implemented to address concerns over high Canadian household debt. Finance Minister Jim Flaherty is changing mortgage rules to make it harder for people with limited means to buy homes or borrow on ones they already have. These changes will price some potential buyers out of the market, and will affect what some can afford.