Summary of changes to mortgage guidelines as per
Finance Minister Jim Flaherty…(effective July 9th, 2012)
1) The maximum amortization period for purchases with less than a 20% down
payment will be 25 years (down from 30 years)
2) Home owners will only be able to refinance their homes up to 80% of the
home’s value (down from 85%)
3) The government is also resetting the maximum Gross Debt Servicing ratio
(GDS) to 39% and the Total Debt Servicing ratio (TDS) to 44% (Currently, GDS
does not apply to qualified borrowers with credit scores of 680+) ***see
below for info on GDS and TDS
4) Mortgage Insurance will no longer be available of homes over $1 million
(you will need to have at least 20% down payment)
OSFI (The
Office of the Superintendent of Financial Institutions Canada is the primary
regulator and supervisor of federally regulated deposit-taking institutions)
Announced the following changes…
1) The maximum loan to value on home equity lines
of credit (HELOCs) is cut to 65% from 80%
2) The loan to value will be re-calculated upon any
refinancing and whenever the lender deems prudent
3) HELOCs will continue to serve as revolving lines
of credit with no specific amortization period. However, OSFI says lenders must
now expect borrowers to have the ability to fully repay HELOCs over time.
***Debt Ratios (GDS / TDS Ratios)
Lenders have long relied on two standard measures of one's "ability
to pay" their mortgage:
Gross Debt Service (GDS): The
percentage of the borrower’s income that is needed to pay all required monthly
housing costs (mortgage payments, property taxes, heat and 50% of condo fees).
Total Debt Service (TDS): The
percentage of the borrower’s income that is needed to cover housing costs (GDS)
plus any other monthly obligations that an individual has, such as credit card
payments and car payments.
The acceptable ratios for both have generally been 32% and 40% respectively.
For people with very high credit scores, GDS requirements are often
waived and the TDS maximum is slightly higher (44% as of January 2011).
Domenic Mirabelli
Mortgage Intelligence
416.303.4480
