First-time home buyers who pay a down payment under 20% must have mortgage default insurance and yes, loans can be up to 95% of the purchase price. Mortgage insurance allows lenders to offer competitive rates and of course provides those with less cash the opportunity to buy a home. However, the insurance also takes the responsibility of the balance owing off the lender should you not be able to make payments.

There are three companies in Canada which the federal government requires the lender to insure those mortgages with (a less 20% deposit): Canada Mortgage and Housing Corporation (CMHC), Genworth Financial and Canada Guaranty.

The CMHC is owned by the government and offers mortgage insurance that covers the total balance owing. Their website is a great resource for home buyers and home owners (planning to renovate). The site provides helpful planning calculators and a PDF downloadable list of CMHC approved lenders.

Genworth Financial Canada is the leading private provider of mortgage insurance and guarantees up to 90%. Their site offers helpful info for home buyers, including their Fall 2010 Homeownership Guide and mortgage calculators.

Canada Guaranty also offers a list of products based on a minimum 5% down payment, however in most cases equity must come from personal finances or can be a gift from a relative but not builder or Realtor incentives.

The cost of the insurance premium is usually included in the mortgage payments, however the total can be paid up front. The amount depends on the percentage of how much the loan covers the cost of the home. Note that provincial sales tax is added to the insurance cost but not the new harmonized sales tax.

Mortgage default insurance differs from mortgage life insurance; an optional insurance that covers the balance in the event of untimely death.
Posted by Lilystar at 9:01 AM

Additional Comments from Kelly Johnston - Licensed REALTOR and Mortgage Broker
Sutton Group Showplace Realty Ltd. - www.suttononline.ca
www.HappyHomesBC.ca

Buying with 5% down is a great way to leverage your money given that we now know that Real Estate prices are at a low and the mortgage interest rates are at an all time low as well. This is exciting and makes for a great recipe for a Buyer. In short, it is a Buyer’s Market. Just get into the market right now if you are not already. If you are able to leverage some equity to buy a rental property then now is the time. Talk to Mom and Dad; sell something; save like crazy; changeover some RRSP’s under the Government Home Buyer’s Plan; just get it together and get it into the Real Estate Market and you will start your path to wealth creation….Call us anytime to learn how to take the next step…Kelly an Nicole Johnston - 604-793-9900.

It’s that time of year again for Top 10 lists, as we say good-bye to 2010 and welcome a new year. Given that home buying is of particular interest to Zoocasa readers, we just had to share a handful of key home buying averages compiled by industry reporting organizations. Curious as to how you stacked up against the average Canadian home buyer in 2010? Let’s take a look.

1. To start, you can compare the amount you paid, or intend to pay, for your home against the average home price in Canada, which was $344,268 in November 2010, up from $337,392 over the same period in 2009. As an average, there is a wide dispersion amongst major cities, and rural areas. For example, Vancouver reported the highest average home price at $699,009 while the average home price in Fredericton was only $159,192.

2. In general, Canadians haven’t done the best job managing their debts this year, with the ratio of household debt-to-disposable income reaching 148.1% in the third quarter of 2010, the highest it’s ever been and even higher than our American counterparts. Though alarming, if you follow the general affordability rule, as outlined by the Canada Mortgage and Housing Corporation (CMHC), that your monthly housing costs (monthly mortgage principal and interest, taxes and heating expenses) should not exceed 32% of your gross household monthly income, then you will be off to a great start.

3. In terms of saving for a down payment, a 2010 CMHC survey reported that 30% of new home-buyers plan to or have more than a 20% down payment, and 70% are making a down payment of less than 20%.

4. Also according to the CMHC, mortgage brokers represented 39% of total mortgage originations in 2010, up from 27% in 2006, with an even higher usage among first-time buyers (45%).

5. In line with the higher usage of mortgage brokers, homeowners say, on average, they obtained 1.96 quotes when financing their current mortgages. The increased number of quotes acquired reflects prospective home buyers’ inclination to ‘shop’ around and compare mortgage rates, a role essentially taken on by a mortgage broker.

6. On to mortgage rates, fixed mortgage rates, at 66% of all mortgages in 2010, were the most common category; however, 29% of mortgages, a significant minority, did have variable rates. Fixed rates were also slightly more popular with younger age groups, while older age groups were more likely to opt for variable rates. The most popular mortgage rate on the whole was the 5-year fixed rate. These trends are in line with historical patterns.

7. Borrowers who took on the 5-year fixed mortgage rate during the past year realized an average mortgage interest rate of 4.23%. The average rate advertised over the same period was 5.65%, suggesting borrowers negotiated 1.42 percentage points below posted rates.

8. Contrary to the reports on high household debt, the vast majority of Canadians felt they could have absorbed higher mortgage payments in 2010. In a survey conducted by the Canadian Association of Mortgage Professionals (CAAMP), 84% of respondents said they could handle increases of $300 or more on monthly payments.

In fact, 28% of mortgage holders did make additional payments on their mortgages last year. This includes 16% who increased their monthly payments and 12% who made lump sum payments.

9. Looking at mortgage terms, a 5-year mortgage term, representing 66% of all mortgages in 2010, was by far the most common duration. A further breakdown shows an additional 8% of mortgages had terms exceeding five years, while 26% of mortgages had shorter terms, including 6% with one year or less and 20% with terms from one year to less than four years. Amongst different age groups there was a slight tendency for younger adults to choose mid-length terms (1-3 years), and older age groups were slightly more likely to take longer terms.

10. The most common mortgage amortization period, on the other hand, was 25 years. Still, 42% of new mortgages in 2010 had amortization periods exceeding 25 years. This is interesting, considering there has been industry talk suggesting regulators may soon shorten the maximum amortization period to curb household debt.

So, did you lock in a 4.23% 5-year fixed mortgage rate with an amortization of 25 years through a mortgage broker, on a home in the range of $344,268? Probably not. But it’s still fun to know how you stack up!

This article was provided by RateHub.ca, an independent, impartial mortgage rate comparison platform. We bring the most competitive mortgage rates to one place, so you can make informed and efficient decisions. We believe that finding the best mortgage rate should be straight-forward, and our website has been designed with that in mind. RateHub works with the top mortgage brokers and lenders in Canada to bring you the most competitive mortgage rates. We update our rates on a daily basis with accurate, real-time data. We also provide ongoing mortgage education and resources to assist you in your selection process.

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Dinningroom View

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