You've probably heard the news and seen the headlines that the rules of mortgages in Canada are changing. Changes will come into effect on July 9, 2012 for the rules for government-backed insured mortgages.
Canada’s Finance Minister Jim Flaherty has announced that:
1. The maximum amortization period for government-backed insured mortgages will be reduced to 25 years from 30 years.
2. The maximum amount that an individual can borrow when refinancing will be lowered to 80% from 85%.
3. The federal government will set a maximum for gross debt-service ratio (GDS) at 39% and lower the maximum for total debt-service ratio (TDS) to 44% from 45%.
4. Government-backed insured mortgages will no longer be available for homes with a purchase price of $1 million or more.
What this means to you when rules are changed, the new rules are likely to encourage purchasers looking to take advantage of the current terms to do so prior to the deadline. Past July 9, however, the new rules are likely to restrain homebuyer demand, particularly from first-time buyers.
The reduction of the maximum amortization period to 25 years will have the most direct impact on Canadian homebuyers.
For clients who have purchased a home already and were approved for financing before June 22nd, the new rules will not apply. For clients who are approved before July 9th but closing after December 31, 2012, the new default insured rules will apply. For clients who are still shopping and have do not have a firm mortgage approval, it is important that they get the right advice about the impact of these new changes to their plans. Note that mortgage pre-approval without an agreement of purchase and sale is not sufficient to qualify for a 30-year amortization after July 9th.
If you have any questions or concerns, please feel free to contact me at 250-305-7034 and I would be happy to supply you with a list of mortgage specialists that can help you look at your future.