Wednesday, April 25, 2007

Banks applaud legislation to lower minimum payment needed for mortgage insurance

Banks applaud legislation to lower minimum payment needed for mortgage insurance

Saturday, April 21, 2007

TORONTO (CP) - Canada's big banks are applauding new legislation that lowers the required down payment for mortgages.

The federal government said Friday it is lowering the minimum down payment requirement for mortgage default insurance from 25 per cent to 20 per cent. The new legislation is part of Bill C-37, expected to be proclaimed next week.

BMO Bank of Montreal says homebuyers could save an average of $2,500 in insurance premiums, based on an average home price of $300,000.

"We see a number of customers scrambling to meet the 25 per cent down payment, in order to avoid paying the insurance premium," said Cid Palacio, Vice President, BMO Bank of Montreal. "These changes will allow those homebuyers to reduce their down payment and get into their new home faster."

The new limit also affects individuals who intend to refinance their mortgages.

RBC Royal Bank said a recent survey it did found 39 per cent of Canadians have borrowed against the equity of their home, by either refinancing their mortgage to a larger amount, or by taking out a home equity line of credit.

"Now, with refinancing at 80 per cent, we're making an extra five per cent equity available to our clients for their financing needs," said Catherine Adams, RBC Royal Bank's vice-president, Home Equity Financing.

Scotiabank said it will cover the cost of insurance paid by the few hundred customers whose high-ratio mortgages are currently being processed. These are customers of the bank who would have been exempt from default insurance under the new rules.

Under the existing Bank Act regulations, which have been in place for 40 years, a bank cannot provide a mortgage loan for more than 75 per cent of the value of the property, without having the customer purchase mortgage insurance. Bill C-37 raises the loan-to-value ratio requiring mortgage insurance from the current 75 per cent to 80 per cent.
More on mortgage rates

Toronto Real Estate Board (TREB) Average Prices and Graph

For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS. 905-828-3434
FAX. 905-828-2829

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