The Canada Mortgage Housing Corporation recently announced more changes to tighten mortgage lending that will come into effect on May 30.
Home buyers looking to purchase a second home will no longer be able to access mortgage insurance, which means you’d need to have a 20 per cent downpayment to purchase the property. Any borrower or co-borrower will only be allowed to access mortgage loan insurance on one property at any time. This means homebuyers save money since they wouldn’t be paying excess insurance loan costs on top of their mortgage, but this also affects their budget for homes they could purchase.
Also, self-employed residents will need to have third-party income validation to qualify for mortgage insurance.
Both of these changes are expected to have small affect on homeowners with borrowers of these types accounting for less than three per cent of the CMHC’s insurance business, according to the Financial Post.
But this comes amid higher mortgage insurance costs that are about to come into effect on May 1, which will only affect new policies. Homeowners who buy a home with a less than 20 per cent downpayment are required to buy mortgage loan insurance, which will see a 15 per cent average premium increase. This was announced by the CMHC and a rate change was quickly followed by private mortgage insurance companies Genworth Canada and Canada Guaranty.
After the housing market crashed in the U.S. to trigger the recession, the world turned its gaze towards Canada’s real estate which has remained active for the last few years with prices continually creeping upward.
There have been numerous reports about our nation’s overvalued housing markets with the overvaluation ranging from 10 to 60 per cent. In some reports, Canada’s housing market has been declared as the most overvalued housing market in the world with economists debating whether it will experience a gradual slowdown or an abrupt halt in housing sales.
The CMHC has made numerous changes over the years to cool the housing market, including tightening mortgage lending rules.
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