Canadian Mortgage Rules Are Changing

Jim Flaherty, Canada’s Finance Minister, announced  changes to mortgage lending rules today which will have an effect on the Canadian real estate market. 

In announcing the changes, Mr. Flaherty lauded Canada’s well-regulated housing industry, and noted that the real estate market has been an important strength in the Canadian economy. Canada’s relatively conservative banking rules have allowed the country to avoid the mistakes of other nations and have helped protect Canadians from the worst of the recent global recession….

There are three basic changes under the new rules, which take effect on March 18, 2011:

1.)  the maximum amortization period for new government-backed insured mortgages will be reduced from 35 to 30 years.

2.) the maximum amount Canadians can borrow to refinance their mortgages will be lowered to 85% per cent from the current 90% per cent.

3.) The government will withdraw its insurance backing on lines of credit secured on homes, such as home equity lines of credit. (not in force until April 18, 2011)

These changes will take effect on March 18, 2011. Overall this is not bad compared to what had been speculated. The one which will have the greatest effect is the lower amortization period, as it reduces borrowing power by the purchaser.

If you are a buyer, or are considering refinancing your home, it is probably a good idea to speak to your mortgage professional asap.