Clarification on New Mortgage Rules

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Clarification on New Mortgage Rules

The Government of Canada recently introduced new mortgage rules on July 9th. We have received many questions regarding these new rules and there seems to be some confusion out there regarding them. Most of these changes only apply to high ratio mortgages (where the borrower has less than 20% down). For borrowers with 20% down (those that have what is called a conventional mortgage) the rules remain unchanged. Below is a list of the changes and some clarification on exactly what they mean for borrowers.

The maximum amortization on a high ratio mortgage going forward is 25 years. For conventional mortgages most lenders have kept their amortization at 30 years.

Purchasers are still able to borrow with as little as 5% down. Anyone can buy with 5% down, not just first time home buyers. You could be looking to purchase the 10th home of your life and still only need 5% down as long as it is your personal residence or a 2nd home.

$0 Down mortgages are still available. You are allowed to borrow the 5% down that you need for the down payment or we have access to cash back mortgages where the lender will give you the 5% down that you need.

If you wish to refinance or borrow against an existing home that you own the maximum you can borrow is 80% of its value. Previously you could borrow up to 85% of its value.

The maximum value of a property that you can purchase with a high ratio mortgage is $1 million. If you want to purchase a property over $1 million then you will need to put a minimum of 20% down.

The maximum amount of your income that can go towards a mortgage payment on a high ratio mortgage has now been reduced to 39% of your income. Previously you could borrow up to 44% of your income towards your mortgage payment if you had clean credit.

Important Reminder Regarding Your Mortgage Renewal

If your mortgage is up for renewal and you are being contacted by your lender to early renew before the maturity date please call or email us before signing the renewal. We are able to give you a quick recap of rates in the market to make sure you aren’t signing for a rate/term that isn’t beneficial for you. Often times your lender will tell you that you only have a very limited time to sign the renewal to pressure you into taking the rate they want. Get in touch with us for a quick 2nd opinion!

If you require any further information regarding this article or any other mortgage matters please contact our office at 604‐556‐3893. Also, as a reminder to anyone looking for a mortgage, we offer 4 month pre-approvals at no cost to you. This means that you can get a rate hold for up to 4 months to protect yourself in case rates rise.

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About the Author:

Alex Kotai

Alex Kotai has worked in the mortgage lending business for over 10 years. His career started at HSBC Bank Canada where he spent most of his time in senior management roles which involved training and managing the sales staff at his branch. After leaving HSBC, Alex decided to open his own mortgage brokerage firm, Your Mortgage Source. Through his company, Alex has access to many lenders across the country with a very expansive list of products.