Troublesome news for Canadians – the removal of the CMHC second home mortgage + MORE May 2nd

The Canadian Mortgage and Housing Corporation (CMHC) has once again moved to crimp the residential mortgage market, introducing changes that will soon make it more difficult for many Canadians to obtain government-financed secured mortgages.
Starting May 30, CMHC will no longer insure mortgages for self-employed Canadians unless their income is formally validated by a third party. More importantly, it’s not going to provide insurance for existing homeowners looking to purchase a second property.
As it stand now, homebuyers in Canada are legally required to purchase mortgage insurance if they don’t put down 20 per cent of the price of the home up front. Buyers pay for the insurance, but it’s the lender that’s actually the beneficiary since the insurance covers the company’s losses if the homeowner defaults.
Fewer Options for Second Home Purchases
This latest change marks the fourth time the government – in an effort to dampen what it believes to be excessive speculation in the housing market – has tightened mortgage rules over the past few years…

Illustrations by Amedeo De Palma
Maria Tucker, Toronto
Then: February/March 2004
&
Now…
Ten years ago Maria Tucker was a 42-year-old marketing executive, earning a six-figure salary in Toronto. She was a single mom just a year away from paying off the mortgage on her townhouse. And because of her good saving habits, she’d tucked away $91,000 into her RRSP. But even though Maria was a huge success at both her job and her finances, she’d grown tired of work-related stress and labouring away at 70-hour workweeks. She wanted to kick back, take a few photography and cooking courses and spend more time with her daughter Christina, then 13. “I feel like the world is whipping by and I’m stuck in a corporate wind tunnel,” she told MoneySense back in 2004.
Being no stranger to hard work, Maria was willing to take part-time jobs—even tending bar or bagging groceries—to finance her escape from corporate life. Still, she didn’t want to endanger Christina’s university education or the quality of their life together…

Illustrations by Amedeo De Palma
Frank Mancini, Port Alberni, B.C.
Then: November 2006
&
Now…
We met young entrepreneur Frank Mancini eight years ago when he was running his own convenience store in Port Alberni, B.C. A self-confessed micromanager who didn’t mind getting his hands dirty, at age 33 Frank was making $126,000 per year and had a net worth of almost $600,000. But he felt pigeon-holed by his job and dreamt of retiring at 45 to see the world. Frank felt that goal was within reach, because he was single, had no dependents and planned to keep it that way. He figured he was on his way to a seven-figure nest egg by age 45. Still, he wasn’t absolutely sure how much he would need for his super-sized retirement. “I’m not an extravagant spender,” he told us back in 2006. “But I really don’t know how much I will need to finance several years of living abroad.”
At the time, nearly every penny of his money was tied up in his business, his home and a mortgage on a commercial investment property…

REUTERS/Gonzalo Fuentes
After a brain-frying degree program many years ago, I put some serious distance between myself and the books by teaching English in Tokyo. Graduating was great, but in those 12 ramen-slurping months I learned more about the world—and myself—than countless essays could ever cover.
Gap years—“life sabbaticals” to travel, work or volunteer before the shackles of careers and mortgages take hold—can be the ideal introduction to independent adulthood. Traditionally taken by Europeans between high school and university, they’re growing in popularity with North Americans, who tend to take them after completing university. But with more options to consider than a wide-eyed backpacker with a Eurail pass, significant pre-trip homework is required. Your enlightened future self—and the Bank of Mom and Dad—will forever thank you for it.
First up: the grand plan. While some are lured by the idea of extended couch residencies, gap years are only meaningful if there’s a valid reason—typically something that’ll shine on your résumé…

On Friday May 24 the Government of Canada via CMHC announced that they were taking steps that could dramatically affect the ability of Canadians to purchase a new home in Canada.  They did this by announcing that they are discontinuing the CMHC second home mortgage program.
My initial thought when I heard the announcement was that our clients purchasing recreational property, second homes for their kids to live in during university, or a home for their elderly parents would either have to work with Genworth or Canada Guaranty (the two alternatives to CMHC), or put down 20% down payment instead of 5%.  Honestly my initial response was that this was not a big deal………Until I read the fine print…..
The fine print of the removal of the CMHC second home mortgage
The fine print and also the most damaging aspect of this change is the CMHC is not just removing the second home mortgage program, they are only allowing Canadians to have One CMHC insured mortgage at any given time…