New Mortgage Refinancing Rules In Canada

Recently, the Canadian government has announced certain changes to the mortgage rules and regulations in Canada. As of July 9 2012, new rules will be applicable to the government backed insured mortgages, with the borrower having less than 20% down payment on his side. In addition to this, the government has planned to:

• Reduce the maximum amortization period on a mortgage loan from 30 years to 25 years

• Drop the upper limit on the amount that one can borrow against the equity to 80% from 85%
• Bound the Gross Debt Service (GDS) ratio to a maximum of 39% of the income, where GDS ratio corresponds to the household income spent on property taxes, mortgage, and heating
• Limit the Total Debt Service (TDS) ratio to utmost 44% of the income, where TDS ratio corresponds to the part of household revenue spent on all the debts including the mortgage
• Restrict the government-backed mortgages to homes priced at amounts less than $1 million; however if the home is priced at a value of $1 million or more, the buyer must have a down-payment of at least 20%

These new rules are applicable to mortgages on all the residential properties up to four units. However, these set of laws do not apply to:

• Renewal of the existing insured mortgages, where no new funds are being added to the existing mortgage
• Mortgages which do not call for government backed mortgage insurance, typically those with a down payment of 20% or more
• Construction and/or development of multi-unit buildings, say five units or more, that are owned by a landlord   

In four years, this is the fourth time that the Canadian government has tightened the rules for borrowing. According to the first modifications made in the year 2008, the maximum amortization i.e. the payback term was reduced from 40 years to 35 years. Additionally, with the introduction of new loan document standards, the homeowners were required to have a down payment of at least 5% compared to the previous level of 0%. 

For more details you can visit @ http://www.canadalend.com