June 26, 2012
In less than two weeks, Ottawa will tighten the rules that regulate mortgage lending in Canada by introducing the following changes:
- Reducing the maximum amortization period to 25 years from 30 years;
- Cutting the maximum amount of equity homeowners can take out of their homes by reducing the refinancing limit to 80 per cent from 85 per cent;
- Limiting the availability of government-backed mortgages to a purchase price of less than $1 million; and
- Fixing the maximum gross debt service ratio at 39 per cent, and the maximum total debt service ratio at 44 per cent.
These changes will prevent some potential home buyers from qualifying for a mortgage, especially younger first-time home buyers who will be knocked out of the market when the maximum amortization period is reduced to 25 years.
"A change in the amortization period may reduce your home buying budget from any where between$10,000 to $80,000" explains Eco Realty CEO Grant Wilson. "For any one who is looking to pre-qualify for a high-ration mortgage before the changes take effect on July 9, now is the time to get off the sidelines and buy a home"