New mortgage rules
Since the height of the credit crisis, finance minister Jim Flaherty has clamped down on mortgage lending. New lending rules were handed down in 2008, 2010 and in 2011. A fourth round of mortgage restrictions was announced in June and will come into effect on July 9, 2012.
The new lending rules that were announced, have been brought in to support the long term stability of the housing and mortgage markets in Canada and to promote savings through home ownership.
Starting on July 9, 2012, individuals and families with less than a 20% down payment will no longer qualify for a prime mortgage with a 30 year amortization period—the maximum will be 25 years. Reducing the amortization period will increase the monthly payment moderately but over the life of the mortgage, this small increase will result in a significant savings in interest costs.
Another major change is the amount that you will be able to refinance. The maximum amount will drop to 80% from the current 85% of the value of the home. By limiting this, it will promote an increase in savings through home ownership which is part of the government’s mandate.
It was also announced that the maximum gross debt services ratio (GDS) will go to 39% while the total debt service ratio (TDS) would be reduced to 44%. These ratios’s measure the amount of a household income that is required to service debt payments and are already used by lenders. By setting a limit on the GDS and reducing the TDS, it will help Canadian households from becoming over extended and vulnerable to interest rate hike when this happens.
If you have any questions or would like a review of your current investments, please call 778-478-9759, or e-mail [email protected]
This column is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, or life insurance, and should not be taken as providing, investment, financial, legal, accounting or tax advice. All services provided through NorthBay Financial Services. Mutual funds are provided through Sterling Mutuals Inc. Insurance is provided through multiple carriers. The opinions expressed are those of the authors and do not necessarily reflect the views or opinions of Sterling Mutuals Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds and Segregated funds are not guaranteed, their values change frequently and past performance may not be repeated.
Read more Your Money articles
- Feeling bullish about the markets? Jul 21
- New mortgage rules Jul 7
- Start saving early Jun 23
- Transferring US retirement plans Jun 9
- Keep volatility in perspective Apr 14
- Budget 2012: Changes to OAS & GIS Mar 31
- Taxation of Investments 101 Mar 17
- RRSP strategies for today Feb 4
(Click for RSS instructions.)