Canada's change in mortgage rules

Are you a buyer on the fence thinking about taking a leap and purchasing a property? Have you been sitting on the edge of your seat waiting for the market to hit bottom so your savings are maximized?

Wait no more!

On June 21, Finance Minister Jim Flaherty announced a major change of tightening mortgage insurance rules in hopes of preventing more civilians from taking on too much debt and causing a real estate economy crash.  But now does this scare put home ownership out of reach?

Flaherty confirmed that Ottawa will reduce the maximum amortization period to 25 years from 30, and will cut the maximum amount of equity homeowners can take out of their homes in a refinancing to 80% from 85%. Also, the availability of government-backed mortgages will be limited to homes with a purchase price of less than $1-million, and the maximum gross debt service ratio will be fixed at 39%, and the maximum total debt service ratio at 44%.

These changes are said to take effect on July 9, 2012, but keep in mind if you have a binding Contract of Purchase and Sale in place and get full mortgage approval by July 9 and have a Completion date scheduled before December 31, 2012, you can avoid the four changes that the government has put in place

This is not all doom in gloom – change is good and is needed. Yes, the unknown is frightening, but if the Canadian economy continued on the path it’s been on for so long, the future outcome may not be so different from our neighbouring country to the South.

Preventative steps and measures are being made in hopes of stabilization and long term longevity. At least our country’s big wigs have stood up and said “Canada deserves a future”.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.