Federal Government's new Mortgage Rules.

On June 21st Finance Minister Jim Flaherty unveiled the new Mortgage rules that took effect this past Monday July 9th.  
The LTV (Loan to Value) percentage has dropped from 85% to 80%  and the maximum amortization has been decreased from 30 years to 25 years.  That means in the past 6 years the government has cut amortization (pay back period) almost in half from 40 years (2006) to 35 (2008) to 30 (2011) to this past Monday’s change to 25 years (2012). 
The GDS (Gross Debt Service or amount of monthly income spent on mortgage, heating, and property taxes) Ratio has also been changed to 39% and the TDS (Total Debt Service or amount spent on all debt incl. mortgage) is now 44%. 
Also government-insured homes now must be $1 million or less and homes priced at $1 million or more must have a 20% down payment paid.
We’ve compiled some of the most informative articles for you to take a look at and if you have any additional questions call your local Mortgage Specialist.
Real Estate Board of Greater Vancouver
Maclean’s Canada
The Globe and Mail
The National Post

New Mortgage Rules March 18, 2011

  • Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent. This will significantly reduce the total interest payments Canadian families make on their mortgages, allow Canadian families to build up equity in their homes more quickly, and help Canadians pay off their mortgages before they retire.
  • Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes. This will promote saving through home ownership and limit the repackaging of consumer debt into mortgages guaranteed by taxpayers.
  • Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs. This will ensure that risks associated with consumer debt products used to borrow funds unrelated to house purchases are managed by the financial institutions and not borne by taxpayers.

To read the full article go to http://www.fin.gc.ca/n11/11-003-eng.asp
Taken from the Department of Finance Canada, Ottawa, January 17, 2011