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The New Mortgage Rules in Canada

Ottawa is announcing the fourth change to lending rules in as many years. Beginning July 9th, we’ll see the following changes to the mortgage rules:

  1. Maximum amortization period on high-ratio mortgages – those with a down payment of less than 20% – is now 25 years. For down payments of 20% or more, the maximum amortization period will be at the discretion of the lender and it is likely home buyers will still have access to 30 and 35 year amortization periods.
  2. No CMHC insurance on home prices over $1M. This means if you’re purchasing a home for $1,000,001, you have to be ready to put down 20% or $200,000. Looking at a home that is $1,000,000 however, you can get away with a down payment as low as $50,000.
  3. Maximum loan-to-value ratio on a refinance will be reduced from 85% to 80%. For loan to value ratios over 80% historically, additional CMHC fees were incurred so many refinancers never went past 80% to begin with.
  4. Maximum gross debt score and total debt score to 39% and 44% respectively.
***If an individual has mortgage lender approval before July 9, 2012, the latest the property can close is December 31st of this year.

The changes are an attempt to curb rising house hold debt and cool the overheated housing market. For more perspective visit: