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22 Jun

As of July 9th, 2012, tighened mortgage insurance rules will take effect

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The Government of Canada announced that it was tightening mortgage insurance rules. These new rules will take effect on July 9th, 2012. Therefore Approvals (not pre-approvals) must be in place by July 8th to honour the 30 year Amortization. Please speak to your bank representative for more details.

Key points:

– Maximum amortization period lowered from 30 years to 25 years.

– Maximum amount Canadians can borrow when refinancing lowered from 85 per cent to 80 per cent of the value of their homes.

– Fixed the maximum gross debt service ratio at 39 per cent and the maximum total debt service ratio at 44 per cent

-Limited the availability of government-backed insured mortgages to homes with a purchase price of less than $1 million.

 

Harper Government Takes Further Action to Strengthen Canada’s Housing Market


As part of the Government’s continuous efforts to strengthen Canada’s housing finance system, the Honourable Jim Flaherty, Minister of Finance, today announced further adjustments to the rules for government-backed insured mortgages.

“Our Government stands behind the efforts of hard-working Canadian families to save by investing in their homes and their future,” said Minister Flaherty. “The adjustments we are making today will help them realize their goals, build on the previous measures we have introduced to keep the housing market strong, and help to ensure households do not become overextended. As just one example, the reductions to the maximum amortization period since 2008 would save a typical Canadian family with a $350,000 mortgage about $150,000 in borrowing costs over the life of that mortgage.”

The Government is announcing four measures for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent:

  • Reduce the maximum amortization period to 25 years from 30 years. This will reduce the total interest payments Canadian families make on their mortgages, helping them build up equity in their homes more quickly and pay off their mortgages sooner. The maximum amortization period was set at 35 years in 2008 and further reduced to 30 years in 2011.
  • Lower the maximum amount Canadians can borrow when refinancing to 80 per cent from 85 per cent of the value of their homes. This will promote saving through home ownership and encourage homeowners to prudently manage borrowings against their homes.
  • Fix the maximum gross debt service ratio at 39 per cent and the maximum total debt service ratio at 44 per cent. This will better protect Canadian households that may be vulnerable to economic shocks or an increase in interest rates.
  • Limit the availability of government-backed insured mortgages to homes with a purchase price of less than $1 million.

“Investing in a home is a great way to save,” said Minister Flaherty. “That is the dream that mortgage insurance was intended to support. The measures we are taking today maintain that intended purpose.”

Minister Flaherty said the new rules will take effect on July 9, 2012.

Article courtesy of the Department of Finance of Canada: http://www.fin.gc.ca/n12/12-070-eng.asp

 

CREA statement on announced changes to mortgage regulations

Ottawa, ON – June 21, 2012 – In response to the Department of Finance announcement on changes to mortgage regulations earlier today, the Canadian Real Estate Association’s President Wayne Moen issued the following statement:

We believe today’s announcement is a measured response to the government’s often stated concern about household debt levels and the housing market. That being said, we would remind the government that the re-sale housing market makes a significant contribution to the economy, adding an estimated $20 billion in spin-off spending and over 165,000 jobs in 2012.

Recent statistics from The Canadian Real Estate Association indicate that the national housing market remains balanced. The impact of measures like those announced today must be closely monitored to ensure they have the anticipated impact and don’t create a spillover effect and slow the economy.

For these reasons, going forward, we would urge the government to consider the impact of further interventions in the market carefully.

REALTORS® and the government share a common interest in the value of homeownership and its contribution to the economy and the well-being of Canadians and our communities.

Property buyers and sellers should contact a REALTOR® if they are considering entering the housing or commercial real estate markets to better understand the impact of these changes in their communities.

The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 104,000 REALTORS® working through more than 100 real estate Boards and Associations.

Article courtesy of the Canadian Real Estate Association:  http://creanews.ca/2012/06/21/crea-statement-on-announced-changes-to-mortgage-regulations/

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