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Blog by Patricia Houlihan - Personal Real Estate Corporation

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Harder to buy as time goes on....Buyers market now but tougher lending rules


Federal Government Changes to Mortgage Lending


For the fourth time in as many years, the Federal Government has announced action to restrict mortgage credit. The new measures include:
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    • The maximum amortization on a prime mortgage will be reduced from 30 to 25 years.
    • Mortgage insurance will not be provided for properties valued over $1 million.
    • Refinancing has been lowered from a maximum of 85% loan-to-value to a maximum of 80% loan-to-value.
    • The maximum gross debt service (GDS) and total debt service (TDS) will be limited to a maximum of 39% and 44% respectively. Currently, GDS does not apply to qualified borrowers with credit scores over 680.


These measures will take effect July 9, 2012.

Here’s a key question members are already asking today:

Q. I have a written mortgage pre-approval from a lender, dated before July 9, 2012 with a 30-year amortization. Will I still be eligible for a 30-year amortization if I don’t sign an agreement of purchase and sale until July 9, 2012 or later?

A. No, a mortgage pre-approval without an agreement of purchase and sale is not sufficient to qualify for a 30-year amortization. You may have a 30-year amortization only if your agreement of purchase and sale is dated before July 9, 2012 and you have made a mortgage insurance application before July 9, 2012. You may wish to discuss with your lender to revise your mortgage pre-approval using the new parameters announced today.

For more information, here’s the government’s Q and A document: www.fin.gc.ca/n12/data/12-070_2-eng.asp