The Canadian Federal government recently announced changes to the rules for home buyers seeking a mortgage.

The maximum amortization length of a mortgage has been reduced from 35 to 30 years and the financing limit reduced from 90 to 85 percent of appraised home value. These changes become effective March 18, 2011.

In addition, lines of credit based on home value will no longer be backed by government insurance as previously provided by the Canada Mortgage and Housing Corporation (CMHC). These announced changes become effective one month later, on April 18, 2011.

How the Mortgage Changes Affect Canadian Home Buyers

Most families or individuals seeking to purchase a new home in Canada will likely not be affected by the government policy changes.

Those that are financially stable, can provide a minimum of 20 percent down for a home purchase and have a manageable debt load will observe no negative effects.

However, there is concern for those who wish to leverage their home equity to the maximum by obtaining the highest possible financing limit, the longest mortgage period, and/or use a home-based line of credit.

Even though it was, but no longer possible, it is unwise to do so and can be potentially financially dangerous.

The primary reason for this is due to the possibility of prime interest rates increasing.

Why the Canadian Government has Changed the Mortgage Rules

The government is acting on the behalf of all Canadian citizens wishing to purchase homes as well as anticipating a possible domino effect that could occur to the financial system for multiple reasons.

First, it is entirely possible that the prime lending rate as set by the Bank of Canada could rise by several percentage points over a period of time.

This action could place highly leveraged borrowers at risk of defaulting on their home loans or mortgages.

The Canadian government does not wish to see a recurrence of the mortgage based financial problems experienced by the United States in the past recent years.

To quote the Finance Minister of Canada, Jim Flaherty,

“We want to caution Canadians that we will not facilitate excessive debt assumption by some Canadians at very low interest rates because that will lead to trouble in the medium and longer term.”

Secondly, it is no secret that Canadian household debt levels have risen considerably over the past several years and are a cause for concern. They are approaching U.S. levels and a significant portion of debt is related to mortgages.

Lastly and some good news is that the action by the Canadian government to change the mortgage rules is likely to be seen by the Bank of Canada as a positive action to control excessive spending and reduce the likelihood of an increase in interest rates.

Whether you are striving to purchase your first home, or simply maintain your existing home, there are financial assistance programs available from the Canadian government.

Becoming more aware of the help available will likely save you thousand of dollars.

Some of the programs available for homeowners all across Canada are described below. It is to your advantage to investigate these as doing so will likely save you not just money, but also time.

How you Can Get Canadian Governemt Assistance

It’s important to make sure that all structural and essential systems in your home are in a good working order. The Residential Rehabilitation Assistance Program (RRAP) is an initiative that was set up in 1973 by the Canada Mortgage and Housing Corporation (CMHC) to help low-income homeowners make repairs that would bring their properties up to an adequate standard of living.

This program covers repairs for heating systems, electrical issues, plumbing, and various other structural problems. But there is a limit to how much financial aid a homeowner can receive through RRAP, and it depends on your geographical location.

Maximum aid available for residents in the southern portion of the country is approximately $16,000, while those living in the far north can receive up to $24,000. If the cost of repairs exceeds the maximum loan amount in your area, you will have to make up the difference.

How to Qualify for Financial Assistance

To qualify for RRAP, your income must be lower than the income threshold, as determined by the Canada Mortgage and Housing Corporation.

Your home must be more than five years old, and the property value must not exceed the limit set by CMHC.

If you’re eligible for funding through RRAP, you are not obligated to repay the loan if you stay in the house during the loan forgiveness period, which could be up to five years, depending on the terms of your agreement.

Government Help and and the Emergency Repair Program

The CMHC has another program designed to assist homeowners with repair costs, called the Emergency Repair Program. To qualify, repairs must be deemed urgent to make the house safe for habitation.

This includes repairs to heating and electrical systems, foundations, roofs, and perhaps other issues.

With the Emergency Repair Program, only emergency repairs are made, regardless of the habitability of the rest of the home, whereas with the Residential Rehabilitation Assistance Program, the entire property must be brought to a minimum standard of safety and livability.

The maximum funding offered through the Emergency Repair Program ranges from $6,000 to $11,000.

Make your Home More Energy Efficient and Get Grants

If are only looking for financial help in making your home more energy efficient, there’s the ecoENERGY Retrofit program. This initiative provides grants for owners of detached and multi family dwellings who modify their properties to be more environmentally friendly.

To receive this grant, owners must first have their properties inspected and evaluated by a representative from Natural Resources Canada. They will compare the energy efficiency of your home with comparable homes in the area, as well as make recommendations for retrofits.

Once the work is completed, you will receive a second assessment to determine the improved energy efficiency of your home.

 The amount of funding you receive will depend upon what modifications you make, and how much impact they have on the total energy efficiency of the home.

The GST and HST Housing Rebate for Canadians

The GST/HST New Housing Rebate is for Canadians who are building a new home or are buying a newly constructed home from a builder. The program also applies to homeowners who have performed a significant amount of renovations on their existing property, as well as those who have been forced to rebuild after a house fire.

This rebate returns to you a portion of the GST costs involved with purchasing new construction. The amount of rebate you’re eligible to receive depends on the value of your home. Properties worth more than $450,000 are not eligible for this rebate.

Getting Help with your Down Payment from the Canadian Government

If you need additional cash to put towards the down payment of a house or to help cover the building costs of a new home, the Canada Revenue Agency has made it somewhat easier to borrow from your RRSP. If you can meet their criteria as a first time home buyer, you can borrow up to $20,000 from you Registered Retirement Savings Plan-tax-free-through the Home Buyers’ Plan.

There are additional programs throughout Canada that provide financial support to seniors and homeowners with disabilities who need to modify their homes to improve accessibility.

There are also provincial programs that help buyers and homeowners deal with the costs of home ownership, and to make it a little easier for low income families to live in safe and comfortable houses.

If you are attempting to buy your first home, any tips that can save you money and perhaps even thousands of dollars are well worth investigating. Investigate these tips and make your first home purchase worthwhile and reduce your costs.

EcoEnergy Retrofit Grant

The Canadian federal government’s ecoEnergy Retrofit grant program can be invaluable to homeowners who want to lower their current energy costs, or who are thinking of putting their home on the market soon.

Canada’s Government introduces Home Buyer Tax Incentives

The Canadian Federal Government introduced a new 1st Time Home Buyers federal Tax Credit in the budget. This is great news for First Time Home Buyers.

Home Owners and Buyers will benefit from the ecoEnergy Retrofit Program

Here is a break-down of how the new budget will help home-owners as well as home-buyers. The budget also builds on the existing ecoENERGY Retrofit program, which provides property owners grants of up to $5000 to offset the cost of making energy-efficiency improvements, such as upgrading insulation.

ecoEnergy Program Buyers And Home Owners

The maximum grant per home is $10,000… $5,000 from the Province and $5,000 from Natural Resources Canada. For example, if you replace your furnace, there’s up to $1,200 available, for attic insulation up to $1200 and so on.

Home Renovation Tax Credit (HRTC)

Will the credit be reduced by other government grants or credits that I may receive for the same expenditures? No.