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More than 60% of Home Buyers Need Mortgage Insurance

October 12, 2012 by  
Filed under Latest News, Latest Rates, Mortgage FAQ, Recent News

More than 60% of Home Buyers Need Mortgage Insurance

 

With the new federal regs coming into play in the near future, what does this mean for your Vancouver Mortgage Broker? Will new home buyers get squeezed out, or are they going to have to pay through the nose to own a home? How will the banks respond with the new changes?

 

Lots of questions, and lots of anxiety, but the future is yet to be written.

 

Let’s take a closer look at where we stand right now in the overall Canadian home market.

 

At present, the average home buyer needs to have a 20% equity down payment or else they have to get mortgage insurance with CMHC.

 

Your typically average Canadian home is worth $350,152. If a buyer were to put a down payment of 10%, and have a steady job with a better than passable credit rating, they will have to shell out an additional $6,302 on mortgage insurance.

 

But, that’s not all, because if you were to amortize this amount over a 25 year mortgage, this is going to cost the buyer over $9,000! That’s not chump change!

 

It’s great if you’re one of the few lucky ones who have 20% or more to put down on your new home. Why? If you got the cash then you can avoid the expensive rigmarole of mortgage insurance.

 

Sadly, this is not the case for the majority of today’s average home buyer.

 

How do we know how things stand? Well, recently the Canadian Association of Accredited Mortgage Professionals (CAAMP) completed a detailed survey of home buyers for the years 2010 – 2012.

 

The survey performed by CAAMP included not only new home buyers but also included repeat buyers. Percentage wise, it was a pretty close split between the groups, but new home buyers had a slight majority coming in at 56% and repeat buyers at 44%.

 

How does this really breakdown? First, the figures you are about to see are just a touch off and don’t quite add just right because they were rounded off, but you’ll get the gist of what’s going on.

 

Home Buyers Survey 2010-2012

 

  1. 10% or less down payment      = 41%
  2. 10% – 19.99% down payment  = 21%
  3. 20% or more down payment     = 39%

 

With the new home insurance mortgage changes in the wind, the big stat to watch for could be that first group of buyer that could be hit hard.

 

But, this is just one of a triple whammy that could be making more than just a few people in the mortgage industry start grinding their teeth.

 

We also keep hearing about financial forecasts for the world economy that keeps hinting at that ugly ‘R’ word, which just adds to the burden of uncertainty. Finally, toss in the new underwriting guidelines put out by the Office of the Superintendent of Financial Institutions Canada (OSFI) in June of this year, and it’s clear that there will be challenging days ahead.