Mortgages New Mortgages Rules in Canada

Published on December 11th, 2012 | by Canadian Credit Expert

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New Mortgage Rules in Canada

It finally happened. Canada has changed its mortgage laws.

The changes, which took effect on July 9th 2012, were implemented to help “cool” a “hot” Canadian housing market. Before we break down the biggest changes, we explain why this is happening and how it could affect Canadians with bad credit.

Many experts are concerned that the housing market in Canada is too strong and if it continues at its recent level of growth, it could – along with rising household debt levels – encourage a housing crisis in Canada.

By slowing the housing market down, limited consumer risk (and their debt levels in Canada) Ottawa hopes to be avoid such a crisis. These changes, which appear minor but are certainly not could reduce mortgage payments and make it easier to pay off a mortgage sooner in Canada.

Here is a overview of the major mortgage changes announcement by Finance Minister Jim Flaherty and administered by your government. The points below cover the two biggest changes made:

  • Maximum length of a mortgage is now 25 years (previous amortization period was 30 years) – this is by far the biggest change.
  • Lenders can only issue home equity loans up to 80% of their value (the previous limit was 85%)

Shorter mortgage terms mean more debt will be paid back on each mortgage payment, and less interest will be paid over the course of the loan. A strategy meant to help Canadians pay off their mortgages sooner and at less borrowing costs.

If you’re struggling with credit problems, then a smaller mortgage payment or being mortgage free are big wins. So before you think “this might make it harder for me to get the house I want”, consider how a smaller mortgage payment and less debt could benefit you.

After all, the more you reduce your debt – the easier it is to overcome credit problems.


About the Author

The Canadian Credit Expert most recently worked in sales financing for a major bank in Canada but has done everything from working at a new car dealership to collecting on past due loans for a Canadian auto lender.



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