Triston Rans - Calgary Mortgage Associate

Recent Changes to Insured / Government Guaranteed Mortgages

Can you explain the recent changes to Insured / Government Guaranteed Mortgages?

There has been a lot of discussion in the news about the recent changes to insured / government guaranteed mortgages in Canada announced by the Minister of Finance.

Mortgage default insurance is mandatory any time a home purchaser is putting less than 20% down. There is a Government Guarantee in place for CMHC (Crown Corporation) Mortgage Insurance, as well as private insurers, such as Genworth Financial Canada and AIG. If this insurance is required, a mortgage insurance premium is applied to your mortgage and is paid to a mortgage insurer. In turn, they agree to insure your mortgage with your lender in the event you default. In other words, it is protection for the lender incase their customer cannot make their payments.

If, all of a sudden, a lot of people can’t make their payments and the insurer, who is supposed to protect the lender, is unable to cover their insurance obligations the Canadian government will guarantee up to 90% of the mortgage amount against insurer default. So, this is security for the lender in the event the insurer defaults.

The Finance Minister of Canada looked at the recent housing / mortgage situation in the US, Britain and Australia and noticed some pretty dire scenarios. After an analysis of the mortgages that fall within their guarantee, the Minister of Finance decided to cease guaranteeing high ratio mortgages with the following characteristics:

- Down payments of less than 5%

- Amortization periods in excess of 35 years

- Non-amortizing mortgages (Interest-Only Mortgages).

- Applications where the beacon (credit) score of both borrowers is less than 620.

These changes are effective Oct. 1, 2008. If you are a current homeowner, and have no intentions of re-financing your mortgage or moving in the near future than this won’t affect you. However if you are a prospective homebuyer, looking for 100% financing or a 40 year amortization then your financing options are becoming a little more limited. Most of the chartered Banks and many lenders have already pulled the above products. Other lenders, such as Merix Financial, will continue to offer these products until October 13, 2008. It is best to speak directly to a mortgage professional if you are wishing to apply for these products prior to the deadline.

For further information regarding your personal mortgage needs, please contact Triston Rans, The Mortgage Group, at 403-571-8142 ext. 237 or email

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