Mortgage Rules Tightening - Effective July 9th, 2012

By Natasha on Jun 21, 2012


Hello Everyone!


News is flying everywhere about the new mortgage rules tightening (again) set out from Flaherty today... You can read up on it the National Post article: 'Ottawa tightens mortgage rules to avert household debt crisis';  But what does this all really mean?


Ultimately, the federal government is working to cool an overheated housing market and rising of household debt levels and I believe ultimately to keep interest rates at a low to hedge inflation.  


What are the changes?

- Will reduce The maximum amortization period for a government-insured mortgage to 25 years from 30 years,

- Will reduce the amount of home equity that can be borrowed to 80% LTV from 85% LTV,

- Will set GDS and TDS at 39% and 44%, respectively,

- Will limit government-backed insured mortgages to home purchases of less than $1 million.


So how does this affect you, the home-buyer or home-owner?

The Good news: It means you will be paying the principle down on your mortgage faster which will reduce household debt...
The Bad news: You will have to qualify for the higher payments or allow time for the equity to come available before you can refinance.
When do these changes take affect?
July 9th, 2012 - so you may need to act quickly if you were thinking of buying soon!


The changes, announced by Finance Minister Jim Flaherty, are the fourth time the government has reduced the maximum amortization period in the last four years, ratcheting it back from 40 years to 35 in 2008, and then further reduced to 30 years in 2011.  We've also heard many rumors about the reduction of the HELOC to 65%LTV from 80%LTV as well as home-buyers requiring more down payment ~ 10% - so these may not be the last of the changes to come!

A lot of people are embracing these changes and I certainly do understand and encourage the benefit of the outcome but I wonder who will be left behind as a result of these changes and why they aren't looking to the banks to start reducing Credit Card debt!

Call Natasha Shaw today!

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