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Pending legislation may reduce minimum down payment requirements

The Canadian government has tabled legislation which, if approved, would allow consumers to purchase homes with a minimum down payment of just 20% without any requirements to purchase mortgage insurance. Currently, anyone who purchases a residence with a down payment lower than 20% is required to insure the mortgage against default with the Canadian Mortgage and Housing Corporation (CMHC) or another insurer. An unidentified federal official couldn’t estimate when the change might take effect as the bill must be passed by both the Parliament and the Senate before it becomes law.

For home buyers purchasing a $200,000 home with 20% down this proposed change would net them a savings of approximately $1,600.00, enough to cover the legal costs of the transaction in most cases.

Alan Silverstein, a Toronto based real estate lawyer and author of several mortgage related books said, “For people with 20% to put down this is a Godsend. You’ll save a chunk of money.” However, Silverstein went on to warn that it’s possible the cost associated with the savings could be passed on to those who have less money to put down through higher insurance premiums.

John Williamson, federal director of the Canadian Taxpayers Federation says homeowners deserve a break on insurance fees. The CMHC made over a billion dollars last year. It’s time to return some of that money to homeowners.” He said lowering down payment requirements makes more sense than “gimmicks” like 40 year amortizations and zero down mortgages with hefty fees attached.

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Norm Fisher
Royal LePage Saskatoon Real Estate