Steve Baldwin

REALTOR®

Working with you EVERY Step of the Way! 

Cell: 604.317.7810 |

Categories
RSS

 
New Mortgage Rules   
 
On June 21, 2012 the Government of Canada announced new rules regarding government-backed insured mortgages. These new rules only apply to mortgages with less than 20% down payment. 
Here is a summary of the new mortgage rules:
  • Reduce the maximum amortization period to 25 years from 30 years. This will reduce the total interest payments made on your mortgage, helping you build up equity in your home more quickly and pay off your mortgage sooner.
  • Lower the maximum amount Canadians can borrow when refinancing to 80 percent from 85 percent of the value of their homes
  • Fix the maximum GDS to 39% and TDS to 44% when qualifying for a mortgage
  • Properties purchased at over 1 million dollars are no longer eligible for mortgage insurance
Read

Federal Government Changes to Mortgage Lending - June 21, 2012

For the fourth time in the past four years, the Federal Government has announced further action to restrict mortgage credit. The new measures include:

  • The maximum amortization on a prime mortgage will be reduced from 30 to 25 years.
  • Mortgage insurance will not be provided for properties valued over $1 million.
  • Refinancing has been lowered from a maximum of 85% loan-to-value to a maximum of 80% loan-to-value.
  • The maximum gross debt service (GDS) and total debt service (TDS) will be limited to a maximum of 39% and 44% respectively. Currently, GDS does not apply to qualified borrowers with credit scores over 680.

These measures will take effect July 9, 2012.


Implications for the BC home market:

  • The new 25 year amortization will have a small but material impact on affordability for homebuyers. For a $300,000 mortgage, the shorter amortization period will add over $150 per month to mortgage carrying costs for homebuyers that would have instead opted for a 30 year amortization. This is equivalent to an approximately 1 per cent increase in mortgage rates.
  • Longer amortization period may also impact the rental market where investors have utilized longer amortization period to lower carrying costs.
  • Prohibiting mortgage insurance for properties over $1 million will impact Vancouver markets to a much greater extent than other Canadian jurisdictions. While this policy may have limited impact on credit access for high-ratio borrowers, it will tighten credit for the $1 million and over segment of the market through its impact on lenders risk management practices. This is particularly true in light of the CMHC already rationing portfolio insurance for low-ratio mortgages.
Q. I have a written mortgage pre-approval from a lender, dated before July 9, 2012 with a 30-year amortization. Will I still be eligible for a 30-year amortization if I don’t sign an agreement of purchase and sale until July 9, 2012 or later?
A. No, a mortgage pre-approval without an agreement of purchase and sale is not sufficient to qualify for a 30-year amortization. You may have a 30-year amortization only if your agreement of purchase and sale is dated before July 9, 2012 and you have made a mortgage insurance application before July 9, 2012. You may wish to discuss with your lender to revise your mortgage pre-approval using the new parameters announced today.


 
Read
Reciprocity Logo The data relating to real estate on this website comes in part from the MLS® Reciprocity program of either the Greater Vancouver REALTORS® (GVR), the Fraser Valley Real Estate Board (FVREB) or the Chilliwack and District Real Estate Board (CADREB). Real estate listings held by participating real estate firms are marked with the MLS® logo and detailed information about the listing includes the name of the listing agent. This representation is based in whole or part on data generated by either the GVR, the FVREB or the CADREB which assumes no responsibility for its accuracy. The materials contained on this page may not be reproduced without the express written consent of either the GVR, the FVREB or the CADREB.