CMHC (Canada Mortgage and Housing Corporation) is making some major changes when it comes to insuring high ratio mortgages (where the purchaser has a down payment of less than 20%). Effective yesterday, it is no longer insuring second homes or offering mortgage insurance to self-employed people who don’t have certain documents to prove how much money they make, as stated in the article linked below. What does this mean for you? Well, it means that if you are a real estate investor, it may be harder to get a second mortgage with less than 20% down, unless, of course, you go through the competition, Genworth or Canada Guaranty. To break down this change, lets say, for example, you lived in your first starter home which you wanted to keep as an income property and move into your next home. Before this change, as long as the amount of both properties combined did not equal to more than $1M, you would be able to put 5% down on your next home and get it insured through CMHC (since mortgage insurance is required for any property where less than 20% of the purchase price is put down). However, this is no longer the case. This new change also make things difficult for self-employed people who own businesses and corporations and defer income/taxes through those entities. Earlier in May, CMHC also raised its mortgage insurance premiums on an average of 15% overall for homeowner occupied and 1-4 unit rental properties. Remember, there are two competitor mortgage insurance companies - Genworth and Canada Guaranty. Next time youre looking to buy a property, make sure you inquire with your mortgage broker/lender which company they will be using to insure your mortgage and request any changes if need be.
Posted on: Sat, 31 May 2014 14:56:42 +0000
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