New Mortgage Rule


How will they affect you?


As of July 9th 2012 new mortgage qualification rules will start to be phased in by the federal government. Here is a simplified one-page summary


1.Mortgage amortization will be reduced from a maximum of 30 years down to 25 years.

Example: a home buyer who now qualifies for a maximum purchase price of $370,000 under the current rules (using 30 year amortization) will only qualify for a maximum of $340,000 under the new rules. And, their minimum monthly payment will increase by $40 per month.


2. An official limit to the financial ratios is now set: 39% GDS and 44% TDS (that limits thepercentage of income that can be used for buying a home and servicing debt).


3. Banks will no longer have access to insuring mortgages for homes over $1m (so they may be more stringent in approving them).


4.Refinance will only be allowed to 80% of the value of the home.

5.Down Payment cash-back or ‘zero-down’ mortgages to be eliminated.

6.Self-employed ‘stated-income’ mortgages for self-employed individuals to be eliminated.

7.Line of Credit limit on secured HELOC reduced to max. 65% of home value (from 80%)

8.Qualifying rate for terms under 5 years becomes’ greater of qualifying rate or contract rate’.

Courtesy of Rudy Bayoumi DLC Easy Street Mortgage Inc.