Mortgage insurance key to strong Canadian housing marketby Harleen Kaur - April 1, 2010
Several experts have analyzed the vital role played by mortgage insurance in the Canadian housing market.
The facility of owing a house in Canada at a comparatively low premium coupled with a down payment of just five percent has made things much easier for home buyers in Canada.
Canada Mortgage and Housing Corporation (CMHC) provides the facility of default mortgage insurance to offer protection to the lenders.
Introduced nearly 35 years ago, mortgage insurance which was earlier known as Central Mortgage and Housing Corporation has enabled even average Canadians to purchase a house in Canada even when the real estate market is going strong in the country since Canadians, no longer, need to wait for raising a down payment of 20 percent.
Mortgage insurance has proved to be of great significance for the Canadians, asserts Ajay Soni, a senior broker with a national lending firm in Vancouver.
Average Canadians have witnessed a strong real estate market in Canada including resale and new, only due to mortgage insurance, adds Soni. In the absence of mortgage insurance, any buyer for houses in Canada would have to fulfill the conditions of either 20 percent down payments or second mortgage at sufficiently high rates of interest.
So now, Canadians don’t need to go for savings to make way for down payments, affirm experts.
Mortgage insurance is a legal requirement for all residential mortgages by any government regulated lender (including banks in Canada) for more than 80 percent of the value (appraised) of a house in Canada whether it’s a new house or a resale house, informs Mark McInnis, vice-president of underwriting, servicing and policy at Canada Mortgage and Housing Corporation.
According to Canadian Association of Accredited Mortgage Professionals (CAAMP), there has been a rise in the home ownership in Canada in the recent times and it is likely to go up further in the near future mainly because lending institutions like banks qualify prospective home buyers at five-year with a fixed rate of mortgages.
Canada’s mortgage insurance industry is an attractive market and has a great future. This is proved from the fact that nearly 400,000 home loans in Canada were insured by CMHC just in one year (in 2008).