Federal Government Changes to Mortgage Lending

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

If you are considering purchasing a new home or refinancing/renewing your current mortgage, I highly recommend you act before July 9th

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