The government has made several changes to the mortgage rules since 2008. Some of these changes are increasing the qualifying interest rate, reducing the amortization period and increasing the amount of down payment required for home buying.

Banks and lending companies have set some special guidelines for mortgage borrowers and the amount of money that banks can lend through home equity. These changes may reduce the number of people considering mortgage lending in Canada.

Continuous changes in mortgage rules over the last few years have affected the behavior of borrowers applying for mortgage in Canada. However, banks in Canada are offering numerous suitable mortgage services to its customers for many years.

Canadian banking regulations do not allow mortgage with less than 20% down payment and mortgage insurance. However, from last few years several changes has been made in mortgage rules by the government.

These changes include:

  • Increasing the amount (Interest rate) that customers need to pay for mortgage.
  • Reducing the mortgage amortization period from 40 years to 25 years.
  • Requiring banks to qualify all borrowers applying for insured mortgage for conventional five year mortgage program, which has high interest rate.
  • Requiring borrowers to pay a down payment of atleast 5% of the price of the home and another 10% will be added if the price will be between $500,000 and $999,999. If a person does not occupy any property he/she will pay a down payment of 20%.
  • Customers will get government –backed mortgage insurance only if the purchase price of their home is less than a million dollars. If the borrower is buying a place above this price they need to pay a down payment of 20%.
  • Borrowing has been limited to 80% of the value of the home when refinancing which was 95% earlier.

It is quite possible that people will change their mind regarding mortgage lending after the implementation of these rules. Also it may be possible that borrowers postpone their plans of buying a new home, buy a less expensive home or they may end up paying larger down payment and larger mortgage installments.

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