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Mortgage Changes - In effect July 9th

~Mortgage Changes - Effective July 9, 2012~

As you may have heard, the Government today "tightened" the rules for mortgages. The Federal Government announced this morning four new restrictions on insured mortgages effective Monday, July 9th, 2012.

These changes include:

  • Reducing the maximum amortization period to 25 years from 30 years.
  • Reducing the maximum amount of equity homeowners can take out of their homes when refinancing to 80% from the current 85%.
  • Limiting the availability of government-backed mortgages to homes with a purchase price of less than $1 million.
  • Fixing the maximum gross debt service ratio at 39% and the maximum total debt service ratio at 44%.

What does this mean to you - Qualification will become a bit more difficult. You may qualify for a bit less, and payments will be slightly higher.

Example - a purchase of $350,000 at today's interest rates would cost a buyer $1,457. After the shortened amortization those payments will go up to $1,635 (both without taxes).

Qualification: Before July 9th, buyers can get in with a family income of about $60,000 and after July 9th, this will go up to $67.000.
Note: this is ballpark, a high credit score client may get in with a bit less income.

On a positive note the 5% down payment rule remains intact.
Let me know if you have more questions.

Tibor Bogdan

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