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:

■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

Source: Real Estate Board of Greater Vancouver