By Mark Schadenberg
My career is to sell houses – a
full-time Realtor for more than 15 years.
The Canadian Mortgage & Housing
Corporation has again managed to figure out how to assist home
buyers, but assist the banks more at the same time.
CMHC was created as an insurance
fall-back, so that Canadians with only 5 per cent as a down payment
can still purchase a home, that's the good news. However, now their
strict rules are becoming more strict as the government mandated body
seemingly wants to dictate how expensive a home you can buy. In other
words, they appear ready to help the first-time buyer into a $250,000
entry-level house, but are ready to throw out a caution flag to a
family hoping to buy in the upper-middle class range, even if that
family has an impeccable credit record and impressive employment
earnings numbers.
Let's understand this first –
Canadian banks do not lose money on anyone's mortgage ever, and
actually make a boatload of money if the home buyer defaults after
more than 2 years of ownership. It's simple math actually as the
lending institution receives any shortfall from (from CMHC) the sale
of the home through a 'power of sale' transaction process.
If anyone buying a home qualifies for
the monthly mortgage payment amount based on their supplied down
payment, employment level and beacon credit score, but have less than
20 percent down, a percentage of insurance costs are added to the
mortgage – i.e. CMHC fee
Using equal money amounts therefore,
CMHC would rather insure you on a $250,000 mortgage with perhaps
$45,000 down payment (15 % down), then a $300,000 mortgage with the
same down payment. Less risk for the insurance company and you own
more instant equity as a percentage. It would almost seem as though
they only want to insure people that don't need insurance, so they
can pocket the profit.
All this seems odd because they just
recently increased the insurance percentage to 3.15% from 2.75% on a
client with only 5% down, which means the premium for a $200,000
mortgage leaped earlier this year from $5,500 to $6,300.
I'm in the wrong line of work. CMHC and
Realtors are supposed to promote home ownership in Canada, but CMHC
seems to be looking only for the absolute 'safe bet'. My opinion.
LINK:
Mark
Schadenberg, Sales
Representative
Senior
Real Estate Specialist (SRES designation)
Royal
LePage Triland Realty
757
Dundas St, Woodstock
www.wesellwoodstock.com
(519)
537-1553, cell or text
Email:
mschadenberg@rogers.com
Twitter:
markroyallepage
Facebook:
Mark Schadenberg, Royal LePage Triland
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