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RISING WOMEN EXPERT
ADVICE...
Can you explain the recent changes to Insured/ Government Guaranteed
Mortgages?
There has been a lot of discussion in the news about the recent changes
to Insured/ Government Guaranteed Mortgages announced by the Minister of
Finance.
Mortgage default insurance is mandatory any time a purchaser is putting less
than 20% down. There is a Government Guarantee in place for CMHC (Crown
Corporation) Mortgage Insurance, as well as private insurers, such as
Genworth Financial Canada and AIG. If this insurance is required, a mortgage
insurance premium is applied to your mortgage and is paid to a mortgage
insurer. In turn, they agree to insure your mortgage with your lender in the
event you default. In other words, it is protection for the lender in case
their customer cannot make their payments.
If, all of a sudden, a lot of people can’t make their payments and the
insurer, who is supposed to protect the lender, is unable to cover their
insurance obligations, the Canadian government will guarantee up to 90% of
the mortgage amount against insurer default. So, this is security for the
lender in the event the insurer defaults.
The Finance Minister looked at the recent housing/ mortgage situation in the
US, Britain and Australia and noticed some pretty dire scenarios. After an
analysis of the mortgages that fall within their guarantee, the Minister of
Finance decided to cease guaranteeing high ratio mortgages with the
following characteristics:
- Down payments of less than 5%
- Amortization periods in excess of 35 years
- Non-amortizing mortgages (interest-only mortgages)
- Applications where the beacon (credit) score of both
borrowers is less than 620
These changes are effective October 1, 2008. If you are a current homeowner,
and have no intentions of re-financing or moving in the near future than
this won’t affect you. However, if you are a prospective homebuyer, looking
for 100% financing or a 40 year amortization then your financing options are
becoming a little more limited. Most of the chartered banks and many lenders
have already pulled the above products. Other lenders will continue to offer
these products until October 13, 2008. It is best to speak directly to a
mortgage professional if you are wishing to apply for these products prior
to the deadline.
For more advice on your personal mortgage needs, please contact Triston
Rans, at The Mortgage Group, at 571.8142 ext. 237, email
tristonrans@mortgagegroup.ca
or visit
www.tristonrans.ca
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