Here are the details of the changes that the Government announced this morning. Four measures for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent. The changes come into July 9, 2012.
What does this mean? If you have less than 20% down payment these changes could affect you. If you have been thinking about refinancing and you do not have more than 20% equity in your property these changes could affect you. If you have any questions please call me.
The changes are as follows:
- Reduce the maximum amortization period to 25 years from 30 years.
- Fix the maximum gross debt service ratio at 39 per cent and the maximum total debt service ratio at 44 per cent.
- Limit the availability of government-backed insured mortgages to homes with a purchase price of less than $1 million.
- Lower the maximum amount Canadians can borrow when refinancing to 80 per cent from 85 per cent of the value of their homes.
What do these mean in plain English?
- You now can only do a mortgage for 25 years, this will effect the amount you can qualify for.
- These ratio’s we use to make sure you can afford your mortgage, they are lowering them a little to make sure when you are qualifying you can make the payments, this could result in qualifying for less.
- If the property is over $1 million you have to have at least 20% down. * Some lenders have what is called a sliding scale and you may need more that 20% down.
- If you want to refinance you must leave 20% equity in the home.
These changes just came out this morning and we will know more details as the days pass but I really wanted to let you know what is going on.
If you have a purchase or refinance that has been approved, you are fine. If you have a pre-approval but have not found a property these changes affect you! If you do not have an offer in by July 9, you have to use the new rules.
If you are thinking about purchasing or refinancing we need to have the approval by July 9 of you want to take advantage of the 30 years.
Please call if your mortgage broker if you have any questions!