Mortgage Blog

New Mortgage Rules

June 21, 2012 | Posted by: Crescent Mortgage Corp.

Finance Minister Jim Flaherty has announced the fourth round of mortgage restrictions in the past four years.

Starting July 9, 2012, those with less than 20% equity will no longer be able to get:

  • a 30-year amortization, the maximum will now be 25 years
  • a refinance to 85% LTV, the maximum will now be 80%

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 restirctions, which will dampen home-buying demand even further. (OSFI’s final guidelines are expected later today.)

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