CMHC expands home ownership
But some insurance rates raised

Fact File
CHMC's insurance premium schedule
Loan Size Premium Premium
(per cent of purchase) (per cent of loan) (per cent of loan)
  Old New
up to 65 per cent .50 per cent .50 per cent
up to 75 per cent .75 per cent .75 per cent
up to 80 per cent 1.25 per cent 1.25 per cent
up to 85 per cent 2.00 per cent 2.00 per cent
up to 90 per cent 2.50 per cent 2.50 per cent
up to 95 per cent 2.50 per cent 3.75 per cent

by Doug Ashbury
Northern News Services

NNSL (Apr 22/98) - Any home buyer putting just five per cent down will be able to get mortgage insurance, the Canadian Mortgage and Housing Corporation (CMHC) recently announced.

But the move, effective May 11, also means slightly higher insurance premiums for some home buyers.

For home buyers who put less than 10 per cent down, mortgage insurance premiums will jump to 3.75 per cent from 2.50 per cent.

On a $95,000 mortgage, the insurance premium increases to $3,562.50, from $2,375.00, a difference of $1,187.50, based on 6.75 per cent interest rate amortized over 25 years.

Purchasers can add the insurance premium to their monthly mortgage payments.

For the $95,000 mortgage, the monthly mortgage payment would be $675.20 compared to $667.07.

CMHC said that with an insurance premium of 2.50 per cent -- the same as loans with two times as much down payment -- CMHC's first home-loan program had a higher risk than other home-owner loans.

For buyers borrowing up to 90 per cent of the purchase price, the percentage premiums remain unchanged.

On March 31, CMHC announced that with only five per cent down, all home buyers will have access to mortgage insurance.

Previously, only first-time home buyers could put five per cent down and get CMHC mortgage insurance.

In the early 1990s, many Canadians could handle a mortgage but could not afford the 10 per cent minimum downpayment.

So in 1992, CMHC reduced the first-time home-buyer's minimum downpayment to five per cent. The program was to end in February 1999 but CMHC has now made it permanent.

Eligible properties must have no more than two dwelling units and the applicant for the 95 per cent insured loan must intend to occupy the property as his or her principal residence.

"Of the more than 610,000 Canadians who purchased their first homes over the past six years, 70 per cent of these purchasers indicated they could not have purchased without the five per cent down option," CMHC president Marc Rochon said.

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