Concerned over rising consumer debt levels, Ottawa has just announced three new changes to Canada's mortgage rules.  They are, in short:

• Mortgages with amortization periods longer than 30 years will no longer qualify for government-backed mortgage insurance, which is required for buyers with less than a 20% down payment on a home. The previous limit was 35 years.

• Maximum amount Canadians can borrow against the value of their homes, lowered to 85% from 90% on  refinancing

• Federal government backing for home equity lines of credit, or so-called HELOCs, is removed

What do these changes mean to Canadians? Safety.

First-time homebuyers are often attracted to longer amortization periods of 35 years because they reduce a monthly payment, but it's important to remember that longer amortization periods dramatically increase the amount of interest paid over the life of the mortgage. That means it's much harder to build equity in the house, leaving a homeowner in a vulnerable position if property values decrease or interest rates increase.

In addition, taking 35 years to pay off a house puts homeowners that much closer to retirement – or even in retirement – with a continuing mortgage payment. Paying the house off in 25 years offers more time to save to retire comfortably.

Ottawa's steps to reduce the rise in home equity lines of credit, or HELOCs, include clamping down on the insurance that Canada Mortgage and Housing Corporation offers to the lines of credit. HELOCs have been surging in Canada, rising at almost double the pace of mortgages over the past 10 years.

The maximum amount Canadians can withdraw from their home equity is dropping for the second time in just over a year; last February this amount was reduced from 95 per cent to 90 per cent, and this year, it is being further reduced to 85 per cent.

Together, these three measures are designed to ensure homebuyers invest responsibly in home ownership and don’t risk their financial security by buying more home than they can reasonably afford.

For more information about how these changes affect you, contact your friendly neighbourhood REALTOR®.