Canada’s New Real Estate Rules For Home Buyers

The Canadian Government has recently implemented new real estate rules for home buyers every Canadian should learn about and understand. These new rules are designed to discourage potential home buyers from acquiring a mortgage they could never afford to repay in the event there was an increase in interest rates. Finance Minister Flaherty announced Canada will stop supporting mortgages that have an amortization period of more than 30 years. The government will be reducing the maximum amortization period from 35 to 30 years for government-backed insured mortgages that have loan to value ratios over 80 per cent. The reason for the reduction is to make it easier for mortgage holders to pay off their household debts earlier and reduce the interest on their loan amount. The most significant part of the new rules is they only apply to buyers requiring government-backed mortgage insurance.

Mr. Flaherty also announced the Federal Government will be reducing the maximum borrowing amount for refinancing mortgages from 90 per cent to 85 per cent of the value of the home. As well, Mr. Flaherty declared the government will be withdrawing government insurance backing on home equity lines of credit (HELOC).

Regarding mortgages for first time buyers, it will not matter what mortgage rate you select since borrowers will have to meet the requirements for a five(5)-year fixed rate mortgage. As a result, if interest rates increase, the rule will prepare borrowers for the higher rates. If you are a first time borrower, it will be much more difficult to qualify for a mortgage.

First time home buyers will have to make some personal financial changes before they apply for a mortgage. For instance, they will have to pay off outstanding debts such as credit card bills and personal loans. Creating a monthly budget will help teach people how to live within their means. Learning not only how to pay off outstanding debt, but also how to reduce monthly expenses is very worthwhile for developing a long term plan of proper fiscal money management. It can be very helpful to work with a credit counsellor to help establish a sustainable budget and develop a plan to pay off outstanding debts and not incur any additional debt in the future.

The decline in the economy these past few years has a tremendous impact on millions of Canadians. For many people, it has become very difficult to manage their debt and save for their future. The Canadian Government’s changes to the mortgage insurance guarantee will go into effect March 18, 2011. The withdrawal of government insurance backing on home equity lines of credit will go into affect April 18, 2011. The Government says the changes are being implemented to help Canadians manage household debt more effectively and improve their financial situation for retirement. The best thing potential first time homebuyers can do is make the essential financial changes now that will teach them better money management so they will be prepared to add a mortgage to their debt.

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  • Toronto Real Estate

    This is a very good idea! Just want to say thank you for the information, you have to share about the Real estate rules for Home buyers…

  • Jagatguru Kripalu ji Maharaj

    Nice policy of rules shown above. The decline in the economy affects a lot. 

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    Internet savvy actual estate professionals are better off to fill in the gaps for these types of clients. Armed with this buyer profile and the proper actual estate net marketing device, you can learn to better recognize and understand the requirements of this market niche.

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