Canada New Mortgage Rules

Changes to Canada’s Mortgage Rules

First Published Date: July 22, 2012 ADawnJournal.com

To tame the Canadian housing market, new mortgage rules kicked in starting June 9, 2012 for government insured mortgages. Here is what you need to know briefly:

– The maximum amortization period is now 25 years (down from 30 years).

– Borrowers now can refinance mortgages using 80 percent of the home value (down from 85 percent).

– Homes costing less than 1 million are eligible for mortgage.

– GDS (gross debt service ratio) ratio and TDS (total debt service ratio) are limited to 39 percent and 44 percent. GDS tells you the percentage of gross annual income you need to cover mortgage and housing related payments such as mortgage payments, property tax, 50% condo fees, etc. TDS tells you percentage of gross annual income you need to cover housing related payments and other debts such as credit cards, car loans, etc. So, TDS = GDS + other debts.

A point worth mentioning is that until these new changes, the acceptable GDS and TDS ratios for mortgages usually have been 32 percent and 40 percent. Also, lenders would relax GDS ratio for borrowers with higher credit scores.