new mortgage insurance rules come into effect

[Anonymous]

http://www.ctvnews.ca/business/new-mortgage-insurance-rules-come-into-effect-1.2778040">http://www.ctvnews.ca/business/new-mort ... -1.2778040">http://www.ctvnews.ca/business/new-mortgage-insurance-rules-come-into-effect-1.2778040

Homebuyers shopping for houses costing more than $500,000 face new rules starting today that are meant to cool the country's hottest housing markets.



The new regulations increase the minimum down payment for homes with a selling price over $500,000.



The move is expected to take pressure off the Canada Mortgage and Housing Corporation, which offers mortgage loan insurance to homebuyers making a down payment of less than 20 per cent.





The minimum down payment for such government-backed insured mortgages will increase from five to 10 per cent for the portion of the house price above $500,000. The minimum down payment on the first $500,000 of the home's price will remain at five per cent.



Homes costing more than $1 million are not affected by the changes, as they already require a 20 per cent down payment. Homes selling for less than $500,000 are not affected either.



The changes mean, for example, that a $700,000 home will now require a minimum down payment of $45,000, up from $35,000. That $45,000 would consist of a five per cent down payment equalling $25,000 for the first $500,000 of the home, added to $20,000, which is the 10 per cent on the remaining $200,000 value.



Finance Minister Bill Morneau announced the changes back in December, saying they were designed to contain risks in the housing market, reduce taxpayer exposure and support long-term stability.



He said the new rules would specifically target Toronto and Vancouver's housing markets, where "prices have been elevated." He said the idea was to protect people buying houses to ensure they have sufficient equity in their home.



At the time, some economists said the changes would likely have only a small effect, since only about a quarter of Canadian homebuyers put a down payment of less than 10 per cent on their homes.



First-time buyers in big cities are most likely to be affected, since those selling homes they already own in cities with hot housing markets would have likely already built up equity in those properties to be able to afford the down payments.



The federal government has introduced a series of changes in recent years aimed at tightening rules for government-insured mortgages. They have included raising the minimum down payment to five per cent; reducing the maximum amortization period to 25 from 30 years; and capping the maximum insurable house price at $1 million.

[Anonymous]

These rule changes were specifically for the Toronto and Vancouver markets.

[cc]

oops

[cc]

While those 2 targets are right, I doubt such token change will make a noticeable improvement

[Anonymous]

While those 2 targets are right, I doubt such token change will make a noticeable improvement

Me neither. House prices across Canada are too high, but they are outrageous in Vancouver and Toronto now too. It might force a few people into condos instead of detached houses.

[Anonymous]

The recent changes our new government announced were a continuation of what was happening for the last eight years..



Should we end down payments with only 5% down?



Under the Conservative government, the finance minister tightened mortgage rules four times between 2008 and 2012. Among the changes, the federal government:

• Required a minimum down payment of at least 5 per cent for a mortgage to qualify for government-backed insurance. Previously, borrowers could get CMHC insurance on mortgages with no money down.

•Scrapped government-backed mortgage insurance on home equity lines of credit.

•Dropped the maximum amortization for mortgages to 25 years from 40 years.

•Capped the maximum home price that could qualify for government-backed mortgage insurance at $1-million.



The CMHC known mostly for insuring mortages is Canada's national housing agency. Their website states that it contributes to the stability of the housing market and financial system, provide support for Canadians in housing need and offer objective housing research and advice to Canadian governments, consumers and the housing industry." CMHC consider prudent risk management, strong corporate government and transparency are cornerstones of its operations. In addition to their website, the CMHC is active on social media and has a newsletter.

[Anonymous]

I am not sure if we boosted the minimum down payment for first time home buyers to ten per cent it would cool down red hot markets like Toronto and Vancouver.