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Canada’s mortgage changes will impact buyers

Some big changes recently came into effect for the Canadian mortgage industry. In a move by the Government of Canada to strengthen and protect the Canadian housing market, changes went into effect on October 15, 2008 regarding how buyers qualify for mortgage loans.  The changes may be good news for the housing industry and the Canadian economy as a whole, but if you’re in the market to buy a home, you may find that these changes make it more difficult for you to qualify for a mortgage. 


According to a news release issued by Toronto-based Strategic Mortgages, there are five major amendments that will impact home buyers:


    1. Loan-To-Value Ratio: Previously, buyers had been able to finance 100% of the purchase price of a home.  Effective October 15, this limit was reduced to 95%, meaning purchasers now require a minimum of a 5% down payment.

    2. TDS ratio: In the past, if a buyer was applying a 5% percent down payment, the TDS (Total Debt Service) ratio limit was either 42% (if their credit score was below 680) or 44% (if their credit score was 680 or above). Under the new rules, the TDS ratio limit is now set at a maximum of 45%.

    3. Amortization Period: The maximum amortization period for mortgages has

been reduced from 40 years to 35 years.

    4. Credit Score:  A minimum credit score requirement of 620 has now been

established.  Potential buyers currently in this bracket should carefully manage their credit and try to increase their credit score.  A missed or late bill payment now could end up costing you a lot more than just the monthly interest when the time comes to qualify for a mortgage loan!

    5. Loan documentation: There are new standards for business owners or self-employed individuals wanting to obtain mortgage financing.  The maximum mortgage you may qualify for will now be based on your credit and your down payment.  Check with your financial advisor for full details.


Not sure how these changes may affect you and your search for a home?  Call me, and I'd be happy to provide you with the information you need to make an informed decision before you head out in search of a mortgage.

Published Monday, November 3, 2008 9:05 AM by DUPLESSIS Real Estate Group


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