If a home buyer has less than a 20 per cent downpayment, they’re required to buy mortgage loan insurance byCanada’s Bank Act (sec. 418).
A home buyer with more than a 20 per cent downpayment is not required to buy mortgage loan insurance. Yet lenders may ask them to buy this insurance anyway as a condition of approving a mortgage.
As of July 31, 2014, Canada Mortgage and Housing Corporation (CMHC), Canada’s largest provider of mortgage insurance, will stop providing mortgage insurance for homes that cost $1 million or more, no matter what the size of the downpayment.
In the REBGV area, 5,377 homes sold for $1 million or more in 2013. Will CMHC’s actions affect home buyers?
“We don’t anticipate any changes,” said Samantha Gale, CEO of the Mortgage Brokers Association of BC. “This is because Genworth and Canada Guaranty, companies which also provide mortgage loan insurance, will continue to provide this insurance.”
Vancity, one of Metro Vancouver’s largest mortgage lenders, doesn’t expect any changes in lending practices or loan volumes resulting from CMHC’s changes.
“Vancity very rarely requires CMHC insurance on mortgages where there is a downpayment of at least 20 per cent,” said Ryan McKinley, senior mortgage development manager at Vancity.
CMHC ends mortgage loan insurance for multi-unit condominium construction
Canada Mortgage and Housing Corporation (CMHC) stopped providing mortgage loan insurance to finance multi-unit condominium construction on June 9, 2014.
CMHC introduced this insurance in 2010 to help developers access insured financing while constructing condominium projects.
Now, CMHC reports that financing is readily available for condominium construction and demand has been so low that CMHC hasn’t provided insurance for multi-unit condominium construction since 2011.
CMHC’s mortgage loan insurance for condominium buyers is unaffected by this change.