Changes to high-ratio mortgages announced by the government.
Rule Changes: Round 4
Finance Minister Jim Flaherty has announced the fourth set of mortgage rule changes in the last four years, to take effect 18 days from now (July 9, 2012).
Those with less than 20% down payment will not longer be able to get a prime mortgage with:
- a 30 year amortization, the maximum will now be 25 years
- a refinance to 85% ltv, the maximum will now be 80%
In addition to these changes, the government will:
- Limit maximum gross debt service (GDS) and total debt service (TDS) to 39% and 44% respectively (Currently, GDS does not apply to qualified borrowers with credit scores of 680+)
- Ban Mortgage Insurance on properties over $1 million
Flaherty refers to these changes as a “judgment call” meant to “lower risk” for taxpayers and curb excessive household debt, which is Canada’s biggest economic risk. The above initiatives are in addition to pending OSFI mortgage restrictions, which will dampen home-buying demand even further. (OSFI’s final guidelines are expected later today.)
These are significant changes to Canada’s lending landscape and I’ll weigh in on the potential outcomes and implications throughout the day on my blog. As always, if you have any questions or concerns, I’m just a phone call away.
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