4 POINTS YOU NEED TO KNOW ABOUT THE NEW MORTGAGE RULES

The intent of these changes is to support the strength of the housing market and to help ensure that households do not become overextended.

1. Lowering the maximum amount consumers can borrow when refinancing their mortgages.
This change will lower the maximum mortgage amount to 80% of the appraised value of the property from the current 85%. This change will help to promote savings in homeownership and encourage homeowners to prudently manage borrowings against their homes.

2. Reducing the maximum amortization period for new government insured (default insured) mortgages.
The maximum amortization for all new default insured mortgages will be reduced to 25 years from the current 30 years. This change will help reduce total borrowing costs for consumers, helping them to build up equity more quickly and pay their mortgage off sooner.

3. Introduce a maximum purchase price for default insured mortgages.
This change will introduce a maximum purchase price of less than $1 million. This change ensures that government-backed mortgage insurance operates the way it was originally intended: to help working families and first-time homebuyers.

4. Introduce exception limits for GDS and TDS ratios for default insured mortgages.
This change will introduce a maximum GDS ratio of 39% and TDS ratio of 44% on an exception basis. This will assist in protecting clients who may be vulnerable to economic shocks or increases in interest rates. Note that RBC policy remains at 32% and 40% respectively (with variable TDS and GDS strategies applying to low risk clients).
The effective date of these changes is Monday, July 9.                      

Pre-July rules apply. New rules apply      


Mortgage Insurance applications date after June 22, 2012 and before July 9, 2012 with a binding purchase and sale agreement and a closing date before December 31, 2012                   


Mortgage Insurance applications date after June 22, 2012 and before July 9, 2012 with a binding purchase and sale agreement and a closing date after December 31, 2012                      


Mortgage Insurance applications taken after July 9, 2012.Pre-approved applications with no binding purchase and sale agreement in place outstanding as at July 9, 2012.


Pre-approved applications with no binding purchase and sale agreement in place outstanding as at July 9, 2012. 


**Robert McLister, a mortgage broker and editor of the Canadian Mortgage Trends blog, said the new rules apply only to new government-insured mortgages after July 9. Existing mortgages with longer amortizations can be renewed as usual. However, those who increase their loan amount on renewal will have to amortize over 25 years.


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