New Canadian Mortgage Rules – July 9th, 2012

Effective July 9th, 2012, the Canadian government – Department of Finance has updated the rules for mortgage lending.  It affects some people, and won’t affect others.  To help clarify whether this will affect you or not, please read the following changes and guidelines for mortgages after July 9th, 2012:

Maximum Amortization Available for Default Insured Mortgages(CMHC, Genworth, Canada Guaranty)
The maximum amortization for default insured mortgages will be reduced to 25 years (previously 30 years)

Maximum Amortization Available for Uninsured Mortgages(Conventional, 20% or greater down)
The maximum amortization for uninsured mortgages remains 30 years

Maximum Purchase Price for Default Insured Mortgages (CMHC, Genworth, Canada Guaranty)
In order to qualify for a default insured mortgage, the purchase price must be less than $1 Million

Maximum Loan-to-Value Ratio (LVR) for Refinances
The maximum LVR for the refinance of an owner occupied property will be reduced to 80% (previously 85%)

Approvals – for Default Insured Mortgages Only (CMHC, Genworth, Canada Guaranty)
The following guidelines are based on the date the application was first received by the Default Insurer:

Submitted on or before June 21, 2012
All loans qualify under previous guidelines

Submitted between June 22, 2012 and July 8, 2012
Purchases: Where a legally binding purchase and sale agreement was signed between June 22, 2012 and July 8, 2012 inclusive, 30 year amortization is available. These loans must be funded by December 31, 2012
Purchases: Where a legally binding purchase and sale agreement was signed June 21, 2012 or before, 30 year amortization is available. No restrictions apply to the funding date
Refinances: Where a refinance is submitted between June 22, 2012 and July 8, 2012 inclusive, the maximum loan-to-value ratio of 85% and 30 year amortization is available. These loans must be funded by December 31, 2012

Submitted July 9, 2012 or after
New rules apply

Amendments
All amendments to existing approvals issued by a Default Insurer with a binding purchase and sale agreement dated before July 9, 2012 will be considered on a case by case basis by the individual Default Insurer

Pre-approvals for Default Insured Mortgages
A mortgage pre-approval without an agreement of purchase and sale is not sufficient to qualify for a 30-year amortization. In order to qualify for a 30 year amortization, the purchase and sale agreement must be dated before July 9, 2012 and the mortgage insurance application submitted before July 9, 2012.

Other
Straight Switch/Transfer from other Financial Institution – Mortgages with remaining amortizations greater than 30 years may be transferred as long as existing mortgage terms are retained

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