Tightening the terms of issuance a mortgage loan in Canada


In late June, the Minister of Finance of Canada, announced new rules for issuing a mortgage loan for the purchase of residential property, which came into force on 9th of July 2012. We are talking about tightening the issuance of loans. It suggests that the government is seriously concerned about the second wave of economic crisis, which has plunged the world economy, and takes measures to ensure the safety of Canadian banking system. Another effect, which the government expects to achieve, is to cool down the real estate market in Canada, primarily in such cities as Toronto and Vancouver.

The essence of the changes is reduced to a few points:
1. Maximum amortization period for a mortgage loan with state insurance is decreased from 30 to 25 years.
2. The maximum amount Canadians can borrow against real estate is reduced from 85% to 80% of the market price of the house.
3. The possibility of obtaining a mortgage with the state insurance on real estate with a value more than $ 1 million is canceled.
4. The maximum allowable ratio of total spending on mortgage payments and the cost of the real estate to total income is fixed at 39% (GDS ratio).