The Federal Government has announced action to restrict mortgage credit. Beginning July 9, 2012 the new mortgage rules will take affect.  The new measures include:

• The maximum amortization on a prime mortgage will be reduced from 30 to 25 years.
• Mortgage insurance will not be provided for properties valued over $1 million.
• Refinancing has been lowered from a maximum of 85% loan-to-value to a maximum of 80% loan-to-value.
• The maximum gross debt service (GDS) and total debt service (TDS) will be limited to a maximum of 39% and 44% respectively. Currently, GDS does not apply to qualified borrowers with credit scores over 680.

How does this affect you?

This affects purchasers with less than 20% down payment

You will now qualify for significantly less

A family with $65,000 in income and no debt with 5% down could previously buy a home for about $525,000.  Now they can only spend about $410,000

*Using today’s 3.09%.

This qualification would be significantly less if you choose a VRM (variable rate mortgage) or term of less than 5 years

For more information, here’s the government’s Q and A document:www.fin.gc.ca/n12/data/12-070_2-eng.asp