The second round of rules were implemented at the end of November with the government requiring banks to carry more of the cost or lending having to do with how they utilize mortgage insurance and the level of capital they have to have on reserve. This means it is more costly for banks to lend so they are passing some of that cost to Canadians.
We now have a tiered rate pricing system based on whether you are “insurable” and meet new insurer requirement to qualify at 4.64% with a maximum 25-year amortization (CMHC, Genworth, Canada Guaranty are the 3 insurers in Canada) or are “uninsurable” where you may have more than 20% down but can’t qualify at the Benchmark rate or need an amortization longer than 25-years to qualify or are self-employed so can’t meet traditional income qualification requirements. Canadians who are uninsurable will be charged a premium to their rate of anywhere from 15-40bps. So your rate would go from 2.79% to 2.94% at the very least. Lastly, as of mid January, CMHC announced they are increasing mortgage default insurance premiums on March 17th, 2017. Genworth did the same, and Canada Guaranty is likely to follow. The insurance premiums are based on a percentage of the mortgage amount requested and how much you have to put down. For people with 5% down the premium will go from 3.60% to 4.00% and if you want to take advantage of the "borrowed down payment" program the premium will go from 3.85% up to 4.5% What does this all mean? Overall it is more costly and more confusing to get a mortgage today than we have seen in many years. With the complexity of the new mortgage market, now more than ever buyers need a mortgage broker with extensive knowledge to help them sort through their options. Give me a call at 647-893-2535 or email me at [email protected] if you need to discuss your mortgage options. Sign Up Here for Monthly Mortgage Updates
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