Flaherty Tightens Canadian Mortgage Rules.

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In a statement Thursday, Finance Minister Jim Flaherty announced a number of new mortgage lending rules. Come July 9th, the CMHC will no longer insure mortgages with amortizations longer than 25 years, and will further limit the amount a homeowner can refinance their mortgage to 80%, down from 85%.

The Harper government has now reduced the maximum amortization three times. In 2008, they reduced the maximum amortization from 40 to 35 years, and in 2011 they reduced it again to 30 years. In July, it will be decreased once more to 25 years, eliminating the last vestiges of the extended amortizations introduced by the CMHC in 2006.

Other changes include a $1,000,000 cap on what mortgages the CMHC will insure, and the maximum gross debt service ratio (GDS) and total debt service ratio (TDS) will be limited to 39 per cent, and 44 per cent respectively.

These new rules do not negatively impact applicants for conventional mortgages, which do not require mortgage insurance. If the borrower is capable of procuring a 20% down payment, they can still obtain uninsured mortgages with 30 year amortizations.

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