Canada Home Mortgage
Recent Changes in the Canada Home Mortgage Industry
Following are a few changes in the Canada home mortgage industry that mirror the U.S. mortgage industry.
Down Payment Change in the Canada Home Mortgage Industry
Saving a down payment is one of the biggest holdbacks to buying a home for many.
In April 2007, regulations changed regarding this. Until then, to get a conventional mortgage, borrowers had to come up with a 25 percent down payment. As of April 21, 2007, it’s 20 percent.
Canada Home Mortgage Industry Down Payment Change Effect: In essence, it means that more people can enter the home-buying market. But, one has to wonder, is this necessarily a good thing.
Statistics show that buyers who save larger down payments are less likely to face foreclosure at some point in the future. This is something to watch.
More Insurance Options for Consumers in the Canada Home Mortgage Industry
Canadian mortgage insurance is primarily offered by two organizations, the CMHC (Canada Mortgage and Housing Corporation). The CMHC is a government agency and is Canada’s largest mortgage insurer. According to an issue of The Law Times, it has “. . . almost 70 per cent of the mortgage insurance market. Last year [2007], it made $875 million on mortgage insurance.”
The other major player in the Canada home mortgage industry insurance game is GE Mortgage Insurance Canada. GE is the largest mortgage insurer in the world, and the only private sector insurer in Canada, until recently.
More mortgage insurers are entering the Canada home mortgage industry. This means more competition, which leads to lower rates and more options for home buyers.
One recent big entrant in the Canada home mortgage insurance industry is AIG United Guaranty.
Canada Home Mortgage Insurance Change of Note: In late 2006, Genworth Financial began offering insurance on mortgages amortized over 40 years. What does this mean?
According to an October 2006 report on ReportonBusiness.com, “The new 40-year amortization option is designed to give homebuyers the flexibility of reducing their monthly mortgage payments for the initial years of homeownership.”
Borrower Changes in the Canada Home Mortgage Industry
Are Canadians starting to mirror their American counterparts when it comes to taking out a home mortgage? Recent changes could make you believe so. Consider the following:
Exotic Loans: Canadians seem more willing to consider exotic loans like ARMs (Adjustable Rate Mortgages) and 0% down payment loans.
Lesser Down Payment: As mentioned above, as of April 2007, new Canada home mortgage regulations only required a 20% down payment to quality for a conventional loan, down from 25%.
One could argue that the sub-prime mortgage debacle in the U.S. is due largely to borrowers having less of a hard money investment in their homes, which makes it so easy to walk away from them (ie, foreclosure).
Are Canadian homebuyers starting to take the same road?
Longer Amortization Terms: A standard mortgage term used to be 20-25 years. Now there are loan amortization terms as long as 40 years.
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