New Mortgage and Mortgage Qualifying Rules Coming!
The Government has announced four measures for new government-backed insured mortgages.
It’s important to know that these new regulations will apply only to CMHC insured mortgages, or specifically those home owners that have or plan to have a down payment of less the 20% of the value of the home (while mortgage lenders can enforce these requirements more widely if they choose).
The new rules, which will take effect on July 9, 2012, are:
- Reduce the maximum amortization period to 25 years from 30 years. This will reduce the total interest payments Canadian families make on their mortgages, helping them build up equity in their homes more quickly and pay off their mortgages sooner. The maximum amortization period was set at 35 years in 2008 and further reduced to 30 years in 2011.
- Lower the maximum amount Canadians can borrow when refinancing to 80 per cent from 85 per cent of the value of their homes. This will promote saving through home ownership and encourage homeowners to prudently manage borrowings against their homes.
- Fix the maximum gross debt service ratio at 39 per cent and the maximum total debt service ratio at 44 per cent. This will better protect Canadian households that may be vulnerable to economic shocks or an increase in interest rates.
- Limit the availability of government-backed insured mortgages to homes with a purchase price of less than $1 million.