Today, Finance Minister Jim Flaherty made an announcement that they will once again be changing the mortgage rules for high-ratio or unconventional mortgages in Canada. Prime mortgages over 80% Loan to Value will fall under these new regulations. It has been over a year since the last time new mortgage rules were announced. Here is a summary of the current new changes which will take effect on July 09, 2012:

1. Maximum 25 Year Amortization – 30 Year Amortization will no longer be available

2. Maximum 80% LTV on Refinances – Currently you are able to refinance up to 85% of the equity in your home

3. Maximum GDS/TDS will be 39%/44% – GDS is Gross Debt Service, while TDS is Total Debt Service. These are ratios that are used for qualification on mortgage loans. Currently the maximum GDS/TDS is 44% for borrowers who have credit scores over 680.

4. No Mortgage Insurance for Properties over $1,000,000 – If a borrower is looking to purchase a home for $1,050,000, they must have a minimum of 20% down payment because mortgage default insurance will not be available.

These rules were put in place to help reduce Canadian Household debt which reached 152% of household income in the fourth quarter of last year. We can expect a cooling of the housing market in major areas such as Vancouver, Toronto and Montreal. These new rules will also make it more difficult for First Home Buyers in Canada to qualify for mortgage financing.