Today, June 21, 2012, the Department of Finance announced upcoming mortgage rule changes. If you are in the process of purchasing a home you will need to contact your lender to review how these changes will impact you.
Changes quoted from the announcement:
The Government is announcing four measures for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent:
- 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.
It is noted that changes come into effect on July 9, but we are expecting more details shortly regarding the implementation process for these new changes.