Minister of Finance Announces Changes to Insured Mortgages

On Thursday, June 21st, the Government of Canada announced changes to government backed insured mortgages, effective July 9th 2012. The new rules are as follows:

1. The maximum amortization period is reduced from 30 years to 25 years for high ratio applications (those who have less than 20% of the property value for a down payment). Banks may continue to offer a 30 year amortization on those borrowing 80% or less of a property's value.

2. Refinancing is reduced from 85% of the equity in a property to 80%.

3. They also set a limit on two ratios used to qualify mortgage applications.  The Gross Debt Service (GDS) maximum is 39% and the Total Debt Service (TDS) maximum is 44%.  Here is a link to those calculations:

4.The maximum purchase price for government backed mortgage insurance is $1 million. This means that a property valued above $1 million requires a 20% down payment.

These adjustments are in force July 9th.  If you have a binding purchase and sale financing agreement or refinancing agreement in place prior to July 9th that closes before December 31, 2012, these new rules will not impact you.  Any new applications on July 9th or after will be impacted by these new rules.


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Today’s Bank of Canada rate hold announcement marks almost four straight years that the key benchmark rate has remained unchanged, since September 8, 2010. Great news if you have a variable-rate mortgage or home equity line of credit; the prime rate stays at 3%.


The announcement noted that “the risks to the outlook for inflation remain roughly balanced, while the risks associated with household imbalances have not diminished.” With these considerations, the Bank is maintaining its monetary policy stimulus, and remains neutral with respect to the timing and direction of the next change.


The next rate-setting day is October 22nd.

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