New legislation will save some Canadian homebuyers thousands in insurance premiums
The great news about Bill C-37 couldn’t have come at
a better time for Canadian homebuyers. After all, it’s a
hot home buying season. You can’t miss the “open house” and
“for sale” signs in almost every neighbourhood across the country.
When it was recently announced that Canadian homebuyers can now
borrow up to 80% of their purchase price without requiring mortgage
insurance – it was like the end of an era. And the beginning of a whole
new surge of interest and opportunity for Canadian homebuyers and homeowners.
It seems like the old “75% rule” had been written in stone
for as long as anyone can remember. (It’s actually been about
40 years for those who are counting). Prior to the Bill – as most
homebuyers were aware – a bank could not provide a mortgage loan
for more than 75% of the value of the property, unless the borrower
purchased mortgage insurance.
For decades Canadian homebuyers fought hard to pull together at least a 25% downpayment on their homes – so they could avoid a whole tier of fees for mortgage insurance. And for many it was a tough barrier to cross as would-be homeowners scrambled to gather cash from other sources, or were forced to wait-and-save on the sidelines while the housing market climbed further and further out of reach.
The new 80% threshold will make a big difference – particularly to first-time homebuyers and those who are looking to refinance. Now if avoiding insurance premiums is a goal, you only need to save a 20 per cent down payment instead of 25 per cent, allowing you to get into a home quicker. It’s welcome relief given years of rising home values.
It’s also an opportunity for others to refinance their mortgage to capture more of their equity, without incurring insurance fees. Many Canadian homeowners have taken advantage of historically low rates – and rolled all their other higher-interest debts into a mortgage.
What kind of savings would the average homebuyer see? Consider this: If the average home price is $290,000, then a home buyer with a 20% downpayment will save about $2,320 in insurance fees. That’s a significant savings
How do you take advantage? Start by calling an experienced mortgage planner who can walk you through the current mortgage picture here in Canada.
Today’s mortgage market is very complex, with an overwhelming abundance of products, features and options. Many Canadians welcome an experienced mortgage planner who understands the intricacy of the marketplace and who can provide recommendations and a mortgage plan based on their needs and long-term goals.
An independent planner deals with over 50 different lending institutions, and can help you compare mortgages from the banks, credit unions, trusts, regional lenders as well as non-traditional lenders. Best of all? Their services are free on approved credit, and there’s no obligation.
A whole new world of financial opportunity has just opened up for many Canadians. It’s a great time to open up a conversation with a mortgage professional who can explain what it might mean for you.
