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Mortgage insurance changes will impact buyers
– moneysense.ca
Mortgage lenders don’t carry enough of the risk of insured mortgages and, as of today’s announcement, this could soon change.
In an effort to reduce the risk to taxpayers, Finance Minister Bill Morneau introduced changes to mortgage insurance rules that will impact both home buyers and banks.
At present, lenders are required to obtain mortgage loan insurance for any high loan-to-value mortgage—a loan where the homebuyer’s down payment or equity in the home is less than 20%. It’s pretty much an industry standard for lenders to pass on the cost of this mortgage insurance to homebuyers.
Ottawa closes foreign buyer tax loophole »
However, lenders can also opt to pass on the risk of a mortgage to taxpayers by paying for mortgage loan insurance, even when the downpayment or the equity in the home is greater than 20%. The insurance is bought and paid for by the lender as it helps defray the downside risk of mortgaging a more expensive property.
However, since last November, the Department of Finance acknowledged that it was examining the impact of shifting more of the risk of insured mortgages onto the banks and mortgage lenders…
In an effort to reduce the risk to taxpayers, Finance Minister Bill Morneau introduced changes to mortgage insurance rules that will impact both home buyers and banks.
At present, lenders are required to obtain mortgage loan insurance for any high loan-to-value mortgage—a loan where the homebuyer’s down payment or equity in the home is less than 20%. It’s pretty much an industry standard for lenders to pass on the cost of this mortgage insurance to homebuyers.
Ottawa closes foreign buyer tax loophole »
However, lenders can also opt to pass on the risk of a mortgage to taxpayers by paying for mortgage loan insurance, even when the downpayment or the equity in the home is greater than 20%. The insurance is bought and paid for by the lender as it helps defray the downside risk of mortgaging a more expensive property.
However, since last November, the Department of Finance acknowledged that it was examining the impact of shifting more of the risk of insured mortgages onto the banks and mortgage lenders…
