Monday, June 25, 2012

CMHC Tightens Up Mortgage Rules

How will the CMHC rule changes affect you? Remember these changes are not only affecting people purchasing homes but also people refinancing. If you are refinancing you will need to have 20% equity in your home or put more money down when you refinance in order to meet the new 80% loan to value refinancing limit.

The Government of Canada has announced more changes to government-backed insured mortgages in the hopes of limiting the amount of household debt Canadians have and to cool the housing market further.

Four changes were announced and will come into effect on July 9, 2012. 
  1. Reduce the maximum amortization period to 25 years from 30 years.
  2. Lower the maximum amount Canadians can borrow when refinancing to 80 per cent from 85 per cent of the value of their homes.
  3. Fix the maximum gross debt service ratio at 39 per cent and the maximum total debt service ratio at 44 per cent.
  4. Limit the availability of government-backed insured mortgages to homes with a purchase price of less than $1 million. All homes over $1 million will require a minimum of 20% down payment.