There are 3 new rules coming into effect this spring that are aimed to further stabilize Canada's housing market. Also, the measures are designed to support hard-working Canadian families build up their savings through home ownership.
The 3 rules:
1. The maximum amortization period will be reduced from 35 to 30 years for new government-backed mortgages with load-to-value ratios of more than 80%. The reduced term will significantly reduce the interest payments Canadian families will have to make, and allow them to build up equity in their homes faster.
2. The maximum amount Canadians can borrow in refinancing their mortgages will decrease from 90% to 85% of the value of their homes. This will limit the repackaging of consumer debt into mortgages guaranteed by taxpayers, and promote saving through home ownership.
3. Government insurance backing on lines of credit secured by homes will be withdrawn. This will mean financial institutions will manage the risk associated with these loans, which protects taxpayers from having to insure these debt products used to borrow funds unrelated to house purchases.
Minister of Finance Jim Flaherty announced the first two rules come into effect March 18, with the third on April 18, 2011.
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