Wednesday, July 23, 2008

CMHC Drops 100% Financing and 40 Year Amortizations- By Oct 15th, 2008

• 100% financing (5% will now be the minimum down payment on an insured mortgage)
• 40 year amortizations (35 years will be the new maximum on insured mortgages)

The government will also require the following with all new mortgages it insures:
• A new 620 minimum credit score requirement
• New loan documentation standards

The new rules will take effect October 15, 2008. This affects CMHC insured mortgages as well as mortgages insured by Genworth, AIG, etc. Insured mortgages are generally those with less than 20% down.

Certain conventional mortgages are also insured, however, in a statement from the Department of Finance said, "Today’s announcement marks a responsible and measured approach by the Government to ensure Canada’s housing market remains strong and to reduce the risk of a U.S.-style housing bubble developing in Canada.
"These new rules pertain only to new, government-backed insured mortgages. This will not affect existing mortgages."

1 comment:

Anonymous said...

Everywhere I read about the housing bubble, and how good and preventive this action was in preventing the U.S. style housing bubble. But I have yet to see a post writtne from the view of the little Canadian, who wants to buy a home for his family but can barely afford it without this mortgage. From my experince of a RE agent specialized in Toronto Condos, this wil be the main issue. I`ve just read an article about PMI trying to negotiate some speciall occasions so it`s not so harsh, so hope for the little Canadian still lives.
I just can`t imagine it well. I guess only time will show how effective it will be.
Elli