New Mortgage Refinancing Rules In Canada

Recently, the Canadian government has announced certain changes to the mortgage rules and regulations in Canada. As of July 9 2012, new rules will be applicable to the government backed insured mortgages, with the borrower having less than 20% down payment on his side. In addition to this, the government has planned to:

• reduce the maximum amortization period on a mortgage loan from 30 years to 25 years
• drop the upper limit on the amount that one can borrow against the equity to 80% from 85%
• bound the Gross Debt Service (GDS) ratio to a maximum of 39% of the income, where GDS ratio corresponds to the household income spent on property taxes, mortgage, and heating
• limit the Total Debt Service (TDS) ratio to utmost 44% of the income, where TDS ratio corresponds to the part of household revenue spent on all the debts including the mortgage
• restrict the government-backed mortgages to homes priced at amounts less than $1 million; however if the home is priced at a value of $1 million or more, the buyer must have a down-payment of at least 20%

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