As of October 15, 2008, people interested in buying homes or refinancing mortgages should be aware of some significant changes that will affect HOW MUCH you can borrow and HOW LONG can you borrow it for.
To avoid the sub-prime lending meltdown that occurred in the U.S. and to maintain a strong Canadian housing market, CMHC (Canadian Housing and Mortgage Corporation), a body of the federal government that guarantees mortgages, will no longer be accepting mortgages with 0% down and with 40 year amortization. Borrowers will now have to come up with a 5% down payment and mortgages can only be amortized to a maximum of 35 years. To read more about the CMHC and the upcoming rule changes, have a browse through the following website.
http://www.cmhc-schl.gc.ca/en/hoficlincl/
The U.S. found itself in a situation where banks and financial companies were lending to high-risk borrowers at low rates. This created a housing bubble that eventually exploded which has significantly impacted their national economy. Mortgages were eventually renewed at interest rates borrowers could no longer afford, they couldn't pay back the mortgage and defaulted.
The Canadian government has stepped in and changed the rules to avoid a bubble in our housing market. Some will criticize the government for its intervention and question why they would implement a rule change that will make it MORE difficult for Canadians to become home owners. The answer is simple. We don't want bubbles, because as with all bubbles......they burst.
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