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Mortgage Rule Changes

Updated Wednesday, June 27, 2012  ::  Views (4741)

Harper Government Takes Further Action to Strengthen Canada’s Housing Market

 

As part of the Government’s continuous efforts to strengthen Canada’s housing finance system, the Honourable Jim Flaherty, Minister of Finance, today announced further adjustments to the rules for government-backed insured mortgages.

“Our Government stands behind the efforts of hard-working Canadian families to save by investing in their homes and their future,” said Minister Flaherty. “The adjustments we are making today will help them realize their goals, build on the previous measures we have introduced to keep the housing market strong, and help to ensure households do not become overextended. As just one example, the reductions to the maximum amortization period since 2008 would save a typical Canadian family with a $350,000 mortgage about $150,000 in borrowing costs over the life of that mortgage.”

The Government is announcing four measures for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent:

  • Reduce the maximum amortization period to 25 years from 30 years. This will reduce the total interest payments Canadian families make on their mortgages, helping them build up equity in their homes more quickly and pay off their mortgages sooner. The maximum amortization period was set at 35 years in 2008 and further reduced to 30 years in 2011.
  • Lower the maximum amount Canadians can borrow when refinancing to 80 per cent from 85 per cent of the value of their homes. This will promote saving through home ownership and encourage homeowners to prudently manage borrowings against their homes.
  • Fix the maximum gross debt service ratio at 39 per cent and the maximum total debt service ratio at 44 per cent. This will better protect Canadian households that may be vulnerable to economic shocks or an increase in interest rates.
  • Limit the availability of government-backed insured mortgages to homes with a purchase price of less than $1 million.

“Investing in a home is a great way to save,” said Minister Flaherty. “That is the dream that mortgage insurance was intended to support. The measures we are taking today maintain that intended purpose.”

Minister Flaherty said the new rules will take effect on July 9, 2012.

 

Courtesy: Department of Finance Canada


Comments ( 2 )

jaym posted the following response Monday, December 17, 2012
It’s in reality a great and helpful piece of info. I’m glad that you simply shared this helpful information with us.
Walter posted the following response Friday, July 13, 2012
I understand that seerval European countries, like Denmark have all interest mortgages, where no principal is paid for the first 10 years. But then at this time, people just keep renewing it with another 10 years of no principal, so they actually never pay anything off, but count on the increase in property value.But doesn't everything have an end? Once we hit 100 year amortization, and you never pay any principal off and prices have risen so high that first-timers can't get in at the ground level then what? Another possibility which I understand happens a lot in Vancouver is that bigger homes get broken down into many smaller homes, e.g. triplexes or stacked townhomes to make them more affordable.I think the only option which remains will be lowering people's expectations of home ownership.

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