By MorinvilleNews.com Staff
Ottawa – Finance Minister Jim Flaherty announced Monday the government was tightening rules on government-backed insured mortgages. The new rules, set to come into effect this spring, will reduce the maximum amortization rate on mortgages from 35 years to 30, and will reduce the amount a person can borrow to refinance their home from 90 per cent of the property’s value to 85 per cent.
“Canada’s well-regulated housing sector has been an important strength that allowed us to avoid the mistakes of other countries and helped protect us from the worst of the recent global recession,” Flaherty said in a release Monday. “The prudent measures announced today build on that advantage by encouraging hard-working Canadian families to save by investing in their homes and future.”
In addition to shortening the amortization period and percentage Canadians can borrow to refinance, the finance minister also announced the government would no longer provide government insurance backing on lines of credit secured by homes, including home equity lines of credit (HELOC).
The feds say the move will ensure the risks associated with consumer debt products used to borrow money for things other than house purchases will be borne by financial institutions and not Canadian taxpayers.
The reduction in amortization affects government-backed mortgages where the home owner is borrowing 80 per cent or more of the homes value. Adjustments to the mortgage insurance framework will take effect Mar. 18. Withdrawal of government insurance backing on home-secured lines of credit will take effect Apr. 18.