One of the other rules the government recently changed was the qualifying ratio’s. You now have to have a maximum gross debt service ration of 39% and a total debt service ratio of 44%.
Your GDS ratio in the percentage of gross annual income that is required to cover payments associated with housing. This includes mortgage principal, interest, property tax, strata fee and heating.
Your TDS ratio includes all the housing payments plus all other debts and obligations such as credit cards and loans.
The government says this will better protect Canadian households that maybe vulnerable to economic shocks or an increase in interest rates.
What do I think, I think this should have been a change instituted last time they did rule changes. I know most of my fellow Mortgage Broker colleagues really look at these ratios and they are a guiding principle of what we do. We believe if they are out of line to work with the clients to make them better, do some planning and get them inline before they purchase.
With that said I know that not all people who offer mortgage do think that. We have just been through a wave of banks offering crazy rates and trying to get as many mortgages as possible and not everyone is a trained professional, sometimes it comes down to the all mighty dollar.
Mortgage Brokers have much stricter rules then the bank employees and road reps and even thought we may lose deals to them I am very glad to me a licensed Mortgage Broker. We have one golden rule, Always do what is right for the client.
So there maybe clients I advise to wait, to do some planning and then purchase, but they don’t want to, they go to the bank and get the mortgage now. With this change in ratio’s I hope that there will be less cases of this and that people do more planning.
P.S. If you don’t have a budget I have a great one, you can download it on my home page or e-mail me and I will send a paper copy.