The Government of Canada announced changes to the guidelines for government guaranteed mortgages in Canada. Home buyers who are purchasing a home with less than a 20% down payment are required to purchase mortgage loan insurance from the Canadian Mortgage and Housing Corporation (CMHC), a crown corporation, or a private insurer such as GenWorth Financial. Since the federal government backs mortgage loan insurance they set many of the guidelines that the insurers must follow.
The new guidelines for mortgage loan insurance include:
- The maximum amortization period for these mortgages will be reduced from 40 years to 35 years.
- Home Buyers must have a minimum 5% down payment towards the purchase of their home. Borrowers can borrow the 5% but only 95% of the value of the home will be insured. Government backed insurance is currently available for up to 100% of a home's value.
- Establishing a minimum credit score requirement; and
- Introducing new loan documentation standards
The federal government made these changes to reduce the risk of a U.S.-style housing bubble developing in Canada.
July 9, 2008Market |