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The government has announced that as of July 9, 2012, new rules will apply to government-backed insured mortgages where the borrower has less than a 20% downpayment.

The government will:

reduce the maximum amortization (pay back) period on a mortgage to 25 years from 30 years;
• lower the maximum amount borrowers can refinance to 80% loan-to-value (LTV) from 85%;
• limit the Gross Debt Service (GDS) ratio to a maximum of 39% of income. The GDS ratio represents the amount of household income spent on the mortgage, property taxes and heating;
• limit the Total Debt Service (TDS) ratio to a maximum of 44% of income. The TDS ratio represents the amount of household income spent on all debts including the mortgage; and
• limit government-insured mortgages to homes priced at less than $1 million. Buyers of homes priced at $1 million or more must have a minimum 20% downpayment. 

 

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