Recently, the Canadian government announced that starting from July 9th, the new mortgage rules will take effect.
These new rules will possibly make more challenge for Canadians for mortgage.
What are the change from home buyers?
- The maximum amortization period is being reduced from 30 to 25 years.
This may increase your monthly mortgage payment, while decreasing the maximum amount you qualify to borrow.
- Homeowners will only be able to borrow 80% of the value of their home instead of the previous 85%.
This means homeowners must now have at least 20% equity in order to re-finance their home.
- The gross debt service ratio will increase from 32% to 39% and the total debt service ratio from 40% to 44%.
This means you can now have a larger debt load compared to your gross income helping to balance the new shorter amortization period. This is a benefit to buyers.
- The government will no longer insure homes that are worth more than $1 million
This means that buyers will have to put at least 20% down or seek private insurance.