The Government of Canada announces 4 significant changes that will affect mortgage qualification for all Canadians buying a home or refinancing a mortgage.
Canadian mortgage changes announced by Finance Minister Jim Flaherty on June 21, 2012:
1. Amortizations reduced to 25 years from 30 years
2. Refinancing limited to 80%
3. Properties purchased at over $1 million are no longer eligible for mortgage insurance
4. GDS and TDS set at 39% and 44%
The first in the list is the reduction of the maximum amortization (the number of years you can spread your mortgage over) for insured mortgages. The current maximum amortization is 30 years, the change is only effecting insured mortgages. The drop of the maximum amortization will reduce the maximum mortgage amount you can qualify for. That means the new 25 year amortization rule may affect your application when buying a new home depending on your income and other factors.
The third change, it is very simple, if you are buying a property for more than $1,000,000.00 you must put at least 20% down.
The fourth change, previously the standard GDS* (Gross Debt Service) ratio was 32% and for customers with a credit score above 680 the GDS was not factored in. The TDS** (Total Debt Service) ratio has not changed. This will effect is people with high credit scores and very little debt like credit cards or loans that are looking to buy a home to the absolute limits that are allowed. For people that have credit scores between 600 and 679 this can actually increase the amount they qualify for in certain circumstances.
~ Larry Arnason, Mortgage Broker
• *GDS – The percentage of your total income used to service the costs associated with the property (Mortgage payment, Taxes, Condo Fees, Heat)
• **TDS – The percentage the total household income used to service all debts including credit cards, lines of credit, personal loans and everything included in the GDS calculation
Form more information on any of our mortgage services please go to www.larryarnason.com or you can call us at: 1-888-722-5086