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CMHC raises ceiling on mortgage assistance



Home buyers able to benefit from

Home buyers in the Sea to Sky corridor will get a break this fall as the Canada Mortgage and Housing Corporation lifts its cap for Mortgage Loan Insurance.

When you qualify for a Mortgage through the CHMC, home buyers are able to purchase a property with as little as 5 per cent down, providing the value of the property does not exceed $300,000.

On Sept. 22, the CMHC is removing that $300,000 cap, giving home buyers the opportunity to put down five per cent on any home – providing they qualify based on income, debt load, credit rating, and other factors.

With the price of homes in the Sea to Sky corridor and Greater Vancouver area steadily increasing, the cap made it almost impossible for many people to buy homes in the towns and neighbourhoods of their choosing.

In Whistler, the removal of the cap can help more people to buy into high-end staff housing.

"It’s great news because it will give a purchaser of (staff) restricted properties access to 95 per cent financing on homes of more than $250,000," said Tim Wake, the general manager of the Whistler Housing Authority (WHA).

"Our duplex townhomes at Beaver Flats sold for $284,000, so many first-time home-buyers weren’t able to qualify for the five per cent mortgage. Now they would be able to."

The cap recently rose from $250,000 to $300,000 before the CMHC decided to remove it entirely.

Lifting of the cap does not affect your ability to qualify for a mortgage, said Wake, or the size of mortgage that you can be pre-approved to apply for. However, it does give a break to the people who have good incomes but don’t have the money in the bank required to make that first down payment. Before Sept. 22, the CMHC required a 10 per cent down payment on homes over $300,000. Now home buyers can get away paying half that amount.

There is a catch – putting less money down at the beginning will result in higher mortgage payments for the homebuyer and possibly longer payback periods.

"They (CMHC) don’t do this for nothing," said Wake. "There a cost to this, and that cost goes out in your mortgage payments."

Wake believes the main beneficiaries of the change to CHMC policy are the people who are already on the WHA list, because many of them will now be able to afford to finance larger duplexes, single family homes and three-bedroom townhomes.

"Anything that was over the cap used to be out of reach for a lot of people because of the down payment, but that’s no longer the case," said Wake.

People who take advantage of the new cap will also have to pay more insurance for their mortgage, according to Annie de la Chevrotiere of Garibaldi Mortgage Inc.

For someone who pays down 20 per cent of the value of a home, insurance premiums are one percent of your total commitment. The amount goes up to 1.75 per cent for a 15 per cent down payment and so on, topping off at 3.25 per cent for people who put just five per cent down.

According to de la Chevrotiere, the changes – which were adopted by GE Capital, a private insurance company that mirrors the CMHC – are still an improvement.

"It does make home buying easier because if you were over the ceiling of $300,000 in the past, you had to put 10 per cent down.

"Before, if you bought a house for $300,000 with five per cent down, you would have to pay $15,000. If the same house was $305,000, you would have had to put down 10 per cent, which is $30,500. That’s a big difference that could disqualify a lot of people from purchasing a home.

"Now you can buy any home of three or four hundred thousand with five per cent down, if you qualify, which makes it easier to buy the home you want."