Update on The Latest Government Changes To The Mortgage Guidelines In Ontario!
These new mortgage rules shouldn't be to earth shattering, all we seem to be doing is going back to the same rules we were accustomed to a few years ago.
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 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)
1) Also announced the following changes…
2) The maximum loan to value on home equity lines of credit (HELOCs) is cut to 65% from 80%
3) The loan to value will be re-calculated upon any refinancing and whenever the lender deems prudent
4) 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).