Home Mortgage Lending | Real Estate News

Real Estate News -The Government is announcing home mortgage lending has four measures for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent:
Reduce the maximum amortization period to 25 years from 30 years. This will reduce the total interest payments Canadian families make on their mortgages, helping them build up equity in their homes more quickly and pay off their mortgages sooner. The maximum amortization period was set at 35 years in 2008 and further reduced to 30 years in 2011.

Lower the maximum amount Canadians can borrow when refinancing to 80 per cent from 85 per cent of the value of their homes. This will promote saving through home ownership and encourage homeowners to prudently manage borrowings against their homes.

Fix the maximum gross debt service ratio at 39 per cent and the maximum total debt service ratio at 44 per cent. This will better protect Canadian households that may be vulnerable to economic shocks or an increase in interest rates.
Limit the availability of government-backed insured mortgages to homes with a purchase price of less than $1 million.

Dave Lacusta, one of our Dominion Lending Mortgage Brokers in Vancouver, BC, gives an example of how this may affect your clients, "a family that makes 100K in income can afford a 700K purchase with 5% down over 30 years, and over 25 years is is decreased to approx 640K". However, Dave cautions that "one of the things to remember is not everybody is at their maximum loan to value when they purchase so it will not effect everybody, but certainly some.

To take advantage of the 30 year mortgage lending amortization period,  buyers will need to be pre-approved and ready to purchase. Buyers will need to have a firm accepted offer and financing firmly approved on a property with a 30 year amortization prior to the rule date changes. This would have to take place before July 9th, 2012.

For more info click Home Mortgage Lending.

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