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New Mortgage Rules Affect Real Estate Purchasing

Since the credit crisis, the Department of Finance has been at the ready to clamp down on mortgage lending. It has handed down new mortgage rules in 2008, 2010, and 2011.

Now, Finance Minister Jim Flaherty has announced yet another round of mortgage restrictions - the fourth in four years. Effective July 9, 2012, those with less than 20% equity will no longer qualify for a prime mortgage with:
  • 30-year amortization. The maximum will now be 25 years
  • Refinancing previoulsy limited to 85% LTV will now be max 80%
Additionally, the government will:
  • Limit the maximum gross debt service and total debt service to 39% and 44% respectively (Currently, GDS does not apply to qualified borrowers with credit scores of 680+), and
  • Ban mortgage insurance on properties over $1 million
Flaherty says these rules are a “judgment call”. They are to “lower the risk” for taxpayers and curb excessive household debt, which is Canada’s biggest economic risk.

These are significant changes to Canada’s lending landscape and will impact the availability of funds for real estate purchases.

Even more reason to work with a trusted mortgage professional, like Tonia Jacobsen.