Mortgage Rules Tighten in Canada

As of July 9th, 2012 -- the rules for government-backed insured mortgages will tighten again!

-The maximum amortization period for government-backed insured mortgages will be reduced to 25 years to 30 years.

- Tee federal government will set a maximum gross debt-service ratio (GDS) at 39% and lower the maximum for total-debt service ratio (TDS) to 44% from 45%.

- The maximum amount that an individual can borrow when refinancing will be lowered from 85% to 80%.

- Also, government insured mortgages will no longer be available for home with a purchase price of $1 million, or more.

Since the fall of 2008, the federal government has been getting more strict with the rules that were in place a few years back. They hope this will strengthen Canada's housing fiance system and help to ensure households do not set themselves up for an 'over extension' when it come to expenses.

Household debt has been singled out as the biggest risk facing the domestic economy by the Bank of Canada.

Even though, Canada's housing market has not been demonstrating signs of 'over-heating', these new rules may create a bit of a 'rush' in the next few weeks, for buyers looking to take advantage of the current terms. Soon, however, they may restrain home buyer demand, especially for first-time home buyers.

Canada will continue to find support from it's expanding economy, and the growth of employment & household income that this new system will generate.