The Canadian federal government is tightening the rules for government-guaranteed mortgages. The changes are designed to protect and strengthen the Canadian housing market and to prevent the turmoil that has happened in the United States from happening here, according to a news release from the Department of Finance.

The changes include

• fixing the maximum amortization period for new government-backed mortgages to 35 years, down from 40 years
• requiring a minimum down payment of five percent for new government-backed mortgages
• establishing a consistent minimum credit score requirement, and
• introducing new loan documentation standards.

The changes are expected to take effect October 15, 2008. They will only affect new government-backed insured mortgages. Canadians who already hold mortgages will not be affected.

More on Financing a Home in Canada

Backgrounder on Residential Mortgage Insurance - Finance Canada

Mortgage Loan Insurance - CMHC

FAQs on Mortgage Loan Insurance - CMHC

Housing Finances in Canada