As expected we heard yesterday (June 2012) from the Department of Finance on some further clamping down on the Canadian mortgage market.
I have attached an article below with the details but here are the hi lites.
-For mortgages when the borrower is putting down less then 20% as their down payment the maximum amortization reduces from 30 years to 25 years. Imagine a 100k mortgage at 3.5% amortized over 30 years. Payments would be $450/month. Take the same and amortize over 25 years and payments go to $500/month.
-Refinance. Maximum loan to value reduced further to 80% from 85%.
In addition, the government will:
- Limit the maximum gross debt service (GDS) and total debt service (TDS) to 39% and 44% respectively (Currently, GDS does not apply to qualified borrowers with credit scores of 680+), and
- Ban mortgage insurance on properties over $1 million.
These rules are a “judgment call” says Flaherty. They’re meant to “lower risk” for taxpayers and curb excessive household debt, which is Canada’s biggest economic risk. The above initiatives are in addition to pending OSFI mortgage restrictions (OSFI’s final guidelines are expected later today.)
Thanks to Mark Mighton of HomeFree Mortgages for the information.