Toronto real estate. NEW MORTGAGE RULES

According new mortgage rules now mortgages with 40-year amortizations and zero-down options are no longer being offered by most of Canada's major lenders. The Canadian government recently announced changes to insured mortgages that will see the maximum amortization period lowered to 35 from 40 years, and a minimum down payment of 5% required, up from zero-down options previously available. While the changes aren't mandated to come into effect until Oct. 15, 2008, most of Canada's major lenders have already adopted the new rules.

"We're going back to where we were almost two years ago on those two points," said Jim Murphy, president of the Canadian Association of Accredited Mortgage Professionals (CAAMP). Murphy called the move a "prudent decision" by the government that will have the most impact on first-time homebuyers.

However, Murphy noted that 30 and 35-year amortizations will still be available and that the difference in monthly payments between the 35-year and 40-year would be minimal.

By the government's own calculations, reducing an amortization from 40 to 35 years on a $200,000 mortgage loan at a 6% interest rate would translate into a $41 increase in monthly payments. The 35-year loan would also save the borrower nearly $50,000 over the life of the loan compared to the 40-year.

A report from Scotiabank in April revealed that three out of every four applications for insured mortgages were for 30 to 40-year amortizations - and of those, more than half were for 40-year terms.

The new rules include the adoption of minimum loan documentation standards to ensure a "reasonableness" of property value and the borrower's source of income, as well as setting a maximum of 45% on the borrowers' total debt service ration - in other words, the proportion of gross income spent on debt service and housing-related payments.

The changes aren't expected to have a huge impact on the majority of mortgage applications.

For more information call Alex and Anna at (416) 723-9383.

Alexandre Malkhassiants, Sales Representative & Mortgage Specialist,
Anna Falileeva, Sales Representative & Mortgage Specialist,
Right At Home Realty Inc., Brokerage
Office: (416) 391-3232
Cell: (416) 723-9383
E-mail: amalkhass@rogers.com
Web site: www.torontogreathomes.com
Toronto real estate market blog: http://torontorealestate.wordpress.com/