Today the government announced the following updates on the mortgage regulation. This will be effective from July 9th. 2012. That is really a super fast implementation of a regulation.
- Reduce the maximum amortization period to 25 years from 30 years.
- Lower the maximum amount Canadians can borrow when refinancing to 80 per cent from 85 per cent of the value of their homes.
- Fix the maximum gross debt service ratio at 39 per cent and the maximum total debt service ratio at 44 per cent.
- Limit the availability of government-backed insured mortgages to homes with a purchase price of less than $1 million.
We shall know by tomorrow morning that what exactly our Finance Minister Jim Flaherty is going to do with Canadian mortgage market.
The probable areas which will get the tightenings are –
- All amortization period will be 25 years, down from 30 years now. This will be certainly for insured mortgages. There are lenders who still offers longer amortization period.
- Home Equity loans will be capped at 80% of the Loan to Value ratio down from 85% now.
- CMHC may also see some changes – details are unknown at this time.
We shall see tomorrow.