Changes to Mortgage Rules Effective July 9th, 2012

The Federal Government has announced four new clamp downs on mortgage financing 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%
Where we are coming from: In 2008 the Government allowed up to 100% financing at 40 year amortizations. If we compare a $300,000 mortgage at 5.79% for 40 years in 2008, the minimum monthly payment required was $1,592.72.

Under the new rules announced today, a $300,000 mortgage for 25 years at a 3.09% five-year fixed rate, the minimum monthly payment required will be $1,433.63.

The difference comparing where we came from to where we will stand after the new rules? Your monthly payment is reduced by $159.09 and you’re mortgage-free 15 years sooner!

Is there a big difference between the 30-year vs 25? No, the difference is only $52.48 per $100,000 in mortgage debt. As seen in the above example, it actually places Canadians in a better financial position.

These changes will only affect insured mortgages. So if you have greater than a 20% down payment or equity built up in your home, we may see these options around a bit longer. But, until July 9th, you can still get a 30-year mortgage even if you have an insured mortgage.
As for the refinance limit, this shows us the federal Government wants to ensure prudence to reduce spending and be certain people are not refinancing all the equity out of their homes.
This information was taken from Department of Finance Canada. For more information go to
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