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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.

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About the Author

Kevin J. Zakus has over a decade of experience in Financial and Investment Planning. He has a diverse practice which includes individuals and families starting the financial planning process, to established individuals and corporations requiring more complex planning.

Most recently Kevin served as a Branch Manager and Financial Consultant with a National Financial Planning Firm in their Calgary and Kelowna Offices. In 2006 Kevin and his family relocated to Kelowna where he continues to build his practice and spend time with his family.

When he is not meeting with clients, Kevin and his wife Julie, try to keep up with their four children and the many activities they are involved in. When they aren't running kids from one event to another, they enjoy spending time boating on Okanagan Lake, travelling, horseback riding and touring local wineries.

Areas of Practice include: Investment, Retirement, Insurance, Estate and Tax Planning.

Email: [email protected]

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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