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Better rate with smaller downpayment!
March 10, 2017
6:43 pm
Norman1
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Loonie said in another thread

… Now, you might argue that for a mortgage that is insured by a government-backed 3rd party, they ought to be required to give the corresponding borrowers better rates which would lessen the burden of that insurance payment;…

Looks like a lender was listening!

In Globe & Mail article Sad but true: Prudent savers are getting hit with the highest mortgage rates, someone reported being offered a rate of 2.79% for a five-year fixed rate mortgage with 20% down that did not need CMHC default insurance. However, if the down payment were lowered and CMHC insurance was required, the rate would drop to 2.69%!

March 10, 2017
10:00 pm
Loonie
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Who knew I had such powers of suggestion?! sf-surprised sf-cool

G&M won't let me read this right now without registering, which I'm not going to do, but the title of the article makes it sound like this was a bad thing.
It makes sense to me. If a lender takes on more risk, you expect a higher rate, just like second mortgages or the ever-deteriorating asset know as used cars. The non-CMHC customer will still end up paying substantially less than the CMHC one, when all is said and done.

Stay tuned for my next trick...!sf-wink

March 11, 2017
12:49 pm
Norman1
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If one has access to the printed newspaper, the article was in yesterday's (Friday, March 10) Globe & Mail, page B1.

Article noted that it is mainly the alternative lenders who do this. The big banks are not doing that yet. However, the article did say BMO had a mortgage promotion that offered up to $1,000 cash to first-time buyers. The offer was conditional on requiring mortgage default insurance.

Could it be worthwhile to get the CMHC default insurance anyways? Not needed for 25% down. The CMHC premium would be 0.75% for 25% down payment. If one could be sure to save 0.10% per annum, then the breakeven is about 8 years.

March 11, 2017
7:22 pm
Doug
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That doesn't surprise me. Since the federal government won't, and for good reason I'd argue, increase CMHC's insurance limit beyond the $600 billion (or so, last I checked), CMHC and the Minister of Finance had reduced the access to the bulk portfolio insurance program, whereby your financial institution pays to insure your mortgage through CMHC or one of the private mortgage insurers that are also 90% insured by the federal government to "de-risk" their portfolio. As they can't access that program at all anymore, more of their mortgage "book" will be "uninsured" and require more capital. 🙁

I wouldn't say CMHC is a "sham" but to say the banks and FIs misuse CMHC and government-backed private mortgage insurance is an absolute understatement. 🙂

Cheers,
Doug

March 12, 2017
10:16 am
Top It Up
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Doug said

I wouldn't say CMHC is a "sham" but to say the banks and FIs misuse CMHC and government-backed private mortgage insurance is an absolute understatement.  

Couldn't agree more!

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