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.