Previous to this announcement, there was wide-spread speculation that the government was going to change current mortgage policies to include a minimum 10% down payment, an increase from the current 5%, and a reduction in amortization from a maximum of 35 to 30 years. Luckily for first-time homebuyers in Canada, these rumours did not come to fruition.

More good news comes with the realization that most mortgage consumers will not be significantly impacted by these three new changes.

Following are the changes that will impact government-backed insured mortgages:

1. Minimum down payment requirements for non-owner-occupied homes will increase to 20% from 5%, and the way that rental income is considered has been scaled back as well.

2. All borrowers will have to meet qualification standards for a five-year fixed-rate mortgage even if they choose a mortgage with a lower interest rate and shorter term (such as one- or three-year terms).

3. The maximum amount Canadians can withdraw when refinancing their mortgages will be reduced from 95% to 90% of the value of their homes.

In essence, the intentions of the new rules are to curb speculation housing and encourage homeowners to use their homes as a savings tool, rather than re-borrowing the equity to pay down loans and credit cards.

Full story: http://www.richardpike.ca/blog