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| FINANCE MINISTERS MEETING, DECEMBER 19, 2011, VICTORIA, BRITISH COLUMBIA (Photo credit: BC Gov Photos) |
The changes include limiting the maximum amortization to 25 years. The amount you can afford is based on monthly income and payments so a shorter amortization means a larger payment which means you can afford less.
The government has also set a maximum Gross Debt Service Ratio (GDSR) at 39% where before it was unlimited if your beacon score was over 680. If your beacon score is under 680 then you have always been limited to 35%. GDSR is the total monthly payments for housing (mortgage, property taxes, heat, and 50% of condo fees).
The effect of these two rules? Someone with good credit, 5% down payment, and an $80,000 annual income with no debt could conceivably have qualified for a home priced at $608,000 last week. This week they would shopping for a home worth $476,000. Certainly a reasonable amount in most markets but it's the difference between a house and an apartment is you're in the Vancouver/Toronto areas.
The third change was to decrease the amount of equity available for refinancing. If you want to access the equity in your home you can only take out 80% now, down from 85%.
And lastly, if you're in the market for a home worth more than $1 million then you will have to come up with a 20% down payment
These new regulations will be enforced through the Canada Mortgage and Housing Corporation (CMHC) so will only affect high ratio mortgages with less than 20% down payment.
I get a lot of inquiries about whether the down payment rules have changed. They have not. You can still purchase your primary residence with 5% down (10% if you're self employed and stating your income). Everything else requires 20%.
If you have any questions please comment below and I will respond promptly. There are no stupid questions.
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