New mortgage rules In Canada
So many of you may have heard that the government has yet again crunched down on mortgage rules. On June 21, in response to increasing household debt, Finance Minister Jim Flaherty announced new rules that he says could save Canadians thousands of dollars. The new rules are as follows:
- The maximum amortization period has been reduced from 30 to 25 years
- If refinancing, the maximum amount you can borrow against the equity in your home is down from 85% to 80%
- Government-backed mortgages will only be available on homes with a purchase price of under $1-million
- During the application process, the maximum allowable gross debt service ratio will be fixed at 39%
- Likewise, the maximum allowable total debt service ratio will be 44%
While a shorter amortization period will make for higher monthly payments, it will do one of two things. It will price ‘high-risk’ candidates out of the market completely, forcing them to save longer beforehand. And it will lessen the amount that is paid out in interest.
The new rules are effective as of July 9, 2012. If you have questions about buying a home and are worried about the new mortgage rules, give me a call. I can answer any questions you may have, you can contact me here.
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