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Getting a low down payment mortgage loan from best mortgage lenders to buy a home ...
In January 2018, the Federal Government ruled that lenders add a 2% STRESS TEST to the interest rate you are offered to qualify you for a mortgage.
This is to ensure you can still afford your home if the interest rates increase when it is time to renew your mortgage.
If you want to buy a home with less than than 20% down then mortgage insurance is required.
The Canadian Bank Act only allows banks and mortgage companies to lend up to 80% of the residential property value – unless, the mortgage is insured.
About insured mortgages - you must qualify for both a mortgage and home mortgage insurance – this is because each component is provided separately.
Click the picture below to access the CMHC low downpayment calculator:
What about the low down payment?
If you have good credit and income, you'll need * 5% down up to $500,000 purchase price, of your own or gifted money. All this at best interest rates.
We're talking about a high ratio insured home loan.
What is the mortgage insurance protection about? The mortgage insurance protects the lender against your default.
Why do you need mortgage insurance? It is compulsory by law. This lets you buy a home with a minimum down payment. Insured mortgage with low down payment is ideal for first time home buyers with good credit and stable full time income.
As a crown corporation, CMHC (Canada Mortgage and Housing Corporation) has a mandate to provide all Canadians with the opportunity to become home owners.
There are also private companies Genworth and Canada Waranty, which offer competitive programs to CMHC as well as some specialty programs in mostly urban areas.
In the case of a home purchase, the maximum mortgage loan amount you can get under an insured program is 95% of the purchase price. The maximum for refinancing is 80% of property value - whether insured or not.
Insurers guarantee the lender that they will repay their loan in full, should you the borrower, default on the mortgage (provided that the lender has complied with all the terms and conditions of the insurer).
Banks in Canada and others institutional lenders are required by law to insure all high ratio mortgages when you buy your house - that is when your down payment is 20% or less. In addition to legal requirement, his gives them more security if you should default.
I think that best low down payment mortgage loans are offered by the broker channel lenders. Need a residential mortgage Hamilton ? We'll make sure that you get best mortgage terms and best Canadian mortgage rates.
Premiums are based on the ratio of the mortgage amount to the property value and the status of the applicant. For example, different rates apply to an employed vs. self employed applicants, with the rates for self employed being slightly higher.
As the loan amount vs. the property value ratio increases, so does the insurance premium, ranging from 1% at the low end to over 6% of the financed amount, at the high end.
The premium is paid by the borrower - it is added to the mortgage amount and spread out over the life of the loan – the fractional amount is included in the monthly payments. You can also choose to pay it upfront in one lump sum if you have the available money.
In closing, if you’re looking to buy a house where the loan amount is greater than 80% of the purchase price, then insurance is a requirement to getting institutional financing.
To better understand and effectively work through all the requirements of both the mortgages insurance and various residential lending programs, please contact me.
Marie Cpeland FSU, Mortgage Financing Hamilton On
You too can get best low down payment mortgage deals.
I will assess your situation and together we’ll work through all your options.
Call 905.537.8815, or
*Lenders change their products and interest rates without notice.
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