New Mortgage Rules

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The Federal Government announced mortgage changes that took effect July 9th, 2012.

What are the changes, who do they affect and more importantly how do they affect you?

 

First, they have changed the amortization back down to the traditional 25 yr from the current 30 yr.  This is for anyone that has less than 20% down payment.  For those with over 20% down, the possibility still exists to get over 25 yrs as an amortization.

Second, they have changed the refinancing limits to 80% of the home's value down from 85%...for now.  Those have to soon to be lowered to 65% by the end of October but many institutions are beginning to lower them now.  If obtaining a HELOC is on your horizon to use equity for investment purposes, borrowing for education, rental property investment or one-time debt consolidation (NOT for personal consumption!) get approved sooner rather then later.

Third, properties with a value of over $1 million will no longer be eligible for mortgage default insurance.  Seems like a no-brainer, if your buying a home of that value you should have at least %20 down.

Fourth, GDS and TDS (which are your debt service ratios) have been set at 39% and 44%.  How much $$$ you make vs how much debt you have to service.

 

Who will this affect?

First time buyers looking to get into the market.  Without a 20% downpayment, these buyers are going to have a hard time breaking into the market until they've saved up more $$$ as a down payment.

Realistically, these are all good changes for Canada.  We should never have allowed amortizations to creep up to a high of 40 yrs in the first place.  With interest rates at an all time low we must look realistically at the amount of debt we are taking on as it could be taxing on families as the interest rates rise.  Buy within your means and live within your means.  No point keeping up with the Jones' if it ends up putting you in a poor financial position.

As always, find yourself a good mortgage broker that can break down your situation and help you find the best options for you and your family.  If you need any names or numbers I have several good ones that I have worked with over the years.  Please feel free to get in touch.

 

 

 

Read 1892 times Last modified on Tuesday, 16 October 2012 16:27

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