CMHC policy change on second homes fails to dent cottage sales

Canada Mortgage and Housing Corp.’s decision to stop insuring mortgages on second homes is not having a noticeable impact on the country’s cottage market…

Reblogged from The Globe and Mail | Tara Perkins

Canada Mortgage and Housing Corp.’s decision to stop insuring mortgages on second homes is not having a noticeable impact on the country’s cottage market, Re/Max says.

CMHC, the Crown corporation that dominates Canada’s mortgage insurance market, said in late April that it was no longer going to insure mortgages on second homes effective May 30.

While a full month has yet to pass since the change came into effect, Gurinder Sandhu, Re/Max’s regional director for the Ontario-Atlantic region, says there has been “very little, if any,” impact on the market for recreational properties.

That’s in large part because people who are buying cottages tend to make a down payment of more than 20 per cent, which means that mortgage insurance isn’t necessary. Also, CMHC’s private sector rivals did not tighten their products to the same degree, meaning that insurance is still a possibility for those who have a smaller down payment.

“While some potential recreational buyers may have been discouraged by the Canada Mortgage and Housing Corp.’s recent decision to eliminate insurance on second mortgages, there is little to no material impact expected from this change,” Re/Max says in its 2014 recreational property report, which will be released Wednesday.

The report says recreational property sales and listings have rebounded from the chill that this winter’s cold weather put on the market. Mr. Sandhu expects that an uptick in sales will make up for the slow start to the year.

“What we’re seeing across the board is high single-digit price increases, and by the end of the year the number of transactions will be on par with last year,” he says.

Here are a few highlights from Re/Max’s regional breakdown of the recreational market:

Tofino/Ucluelet, B.C.

– Overall prices are down about 20 per cent since before the recession.

– A number of vacant lots have been sold this year, meaning more construction is coming.

– The most expensive property sold in Ucluelet so far this year was a beachfront vacation rental home with a caretaker cottage for $1.6-million.

– The most expensive in Tofino was a 1.5-acre, 4,600-square-foot oceanfront property for $7.9-million.

Whistler, B.C.

– The market is picking up after suffering a slump following the 2010 Winter Olympics.

– One of the most expensive properties sold in the past year was a 7,000-square-foot, five-bedroom estate with a guesthouse, pool and tennis court on six acres of land for $10-million.

Canmore, Alta.

– Including both houses and condos, the average price is about $556,000 and sales have been steady over the past year.

– The average price for a single-family home is $888,000.

– One of the most expensive homes sold recently was a 3,500-square-foot, four-bedroom, four-bathroom property with two fireplaces for about $2.3-million.

Lake Winnipeg West, Manitoba

– Prices start at about $70,000, while the average price of a three-season home ranges from $95,000 to $140,000. Winterized properties are closer to $375,000.

– There has been an increase in inventory in Sandy Hook with discussions under way about installing a sewer system in the area.

– Vacant land sales are becoming increasingly popular, especially among hunters and those looking for recreational land.

Collingwood, Ont.

– There is roughly a 60/40 ratio of homes and cottages to condos now.

– Recreational property prices have stabilized and are now rising.

– At least 13 properties have sold for more than $1-million this year.

– A typical two-bedroom winterized waterfront cottage ranges from about $450,000 on the east side of town to about $650,000 on the west side.

Bracebridge/Gravenhurst

– Appears to be a buyer’s market.

– Typical cottages start at about $300,000 riverfront or $400,000 lakefront, plus an additional $100,000-plus for ones that are winterized.

– One of the most expensive properties on the market, a 5,500-square-foot home on a 22-acre island, was recently listed for $6.4-million.

North Shore/South Shore, PEI

– Sales have been slow.

– An oceanfront cottage in PEI starts at about $180,000 and increases to about $900,000 depending on size and location.

– One of the most expensive properties listed in the past year was a 2,000-square-foot oceanfront place with five bedrooms and three bathrooms, which sold for $372,450.

Read original article

CMHC Fees Increasing May 1st

2011_mastheadPrintEnFollowing the February 28th announcement by CMHC – Mortgage Loan Insurance premiums will be increasing as of May 1st.  Insuance premiums will affect all owners buying or refinancing who required insured financing. This includes owners of rental properties. Existing insured mortgages are not affected. CMHC estimates the average Canadian homebuyer requiring insured financing will see an increase of approximately $5 to their monthly mortgage payment.  Feel free to ask us more by leaving a comment at the bottom of the page, and read below for the official bulletin!

CMHC to Increase Mortgage Insurance Premiums

OTTAWA, February 28, 2014 — Following the annual review of its insurance products and capital requirements, CMHC will increase its mortgage loan insurance premiums for homeowner and 1 – 4 unit rental properties effective May 1, 2014.

The increase applies to mortgage loan insurance premiums for owner occupied, self-employed and 1-to-4 unit rental properties, including low-ratio refinance premiums. This does not apply to mortgages currently insured by CMHC.

CMHC’s capital management framework is consistent with international practices and Canadian guidelines for mortgage insurers. Increased capital targets are consistent with Canadian and international industry trends and makes the financial system more stable and resilient.

“The higher premiums reflect CMHC’s higher capital targets” said Steven Mennill, CMHC’s Vice-President, Insurance Operations. “CMHC’s capital holdings reduce Canadian taxpayers’ exposure to the housing market and contribute to the long term stability of the financial system.”

For the average Canadian homebuyer requiring CMHC insured financing, the higher premium will result in an increase of approximately $5 to their monthly mortgage payment. This is not expected to have a material impact on the housing market.

Effective May 1st, CMHC Purchase (owner occupied 1 – 4 unit) mortgage insurance premiums will increase by approximately 15%, on average, for all loan-to-value ranges.

Loan-to-Value Ratio Standard Premium (Current) Standard Premium (Effective May 1st, 2014)
Up to and including 65% 0.50% 0.60%
Up to and including 75% 0.65% 0.75%
Up to and including 80% 1.00% 1.25%
Up to and including 85% 1.75% 1.80%
Up to and including 90% 2.00% 2.40%
Up to and including 95% 2.75% 3.15%
90.01% to 95% – Non-Traditional Down Payment 2.90% 3.35%

CMHC reviews its premiums on an annual basis and, going forward, plans to announce decisions on premiums in the first quarter of each year. The homeowner premium increase follows changes CMHC made to its portfolio insurance product earlier this year.

As Canada’s national housing agency, CMHC draws on more than 65 years of experience to help Canadians access a variety of quality, environmentally sustainable, and affordable housing solutions that will continue to create vibrant and healthy communities and cities across the country.

For additional highlights please see attached backgrounder and key fact sheet.

Information on this release:

Charles Sauriol, Media Relations
613-748-2799
csauriol@cmhc-schl.gc.ca

Follow CMHC on Twitter @CMHC_ca

Backgrounder

  • Mortgage loan insurance helps protect lenders against mortgage default and enables consumers to purchase homes with a minimum down payment of 5% with interest rates comparable to those with a 20% down payment. Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price.
  • CMHC mortgage loan insurance premium is calculated as a percentage of the loan based on the loan-to-value ratio. The premium can be paid in a single lump sum but more frequently is added to the mortgage principal and amortized over the life of the mortgage as part of regular mortgage payments.
  • CMHC reviews its premiums on an annual basis and has adjusted them several times since being commercialized in 1998. Adjustments have included both increases and decreases to the premiums.
  • CMHC’s new premium rates will be effective for new mortgage loan insurance requests submitted on or after May 1, 2014. The current mortgage loan insurance premiums will apply for applications submitted to CMHC prior to May 1, 2014, regardless of the closing date. As is normal practice, complete borrower and property details must be submitted to CMHC when requesting mortgage loan insurance.
  • The increase applies to mortgage loan insurance premiums for residential housing of 1-to-4 units. This includes owner occupied, self-employed and 1-to-4 unit rental properties, including low-ratio refinance premiums.
  • In 2013, the average CMHC insured loan at 95% loan-to-value was $248,000. Using these figures, the higher premium will result in an increase of approximately $5 to the monthly mortgage payment for the average Canadian homebuyer. This is not expected to have a material impact on the housing market.
95% Loan-to-Value
Loan Amount $150,000 $250,000 $350,000 $450,000
Current Premium $4,125 $6,875 $9,625 $12,375
New Premium $4,725 $7,875 $11,025 $14,175
Additional Premium $600 $1,000 $1,400 $1,800
Increase to Monthly Mortgage Payment $3.00 $4.98 $6.99 $8.98

Based on a 5 year term @ 3.49% and a 25 year amortization

*Premiums in Manitoba, Ontario and Quebec are subject to provincial sales tax — the sales tax cannot be added to the loan amount.

85% Loan-to-Value
Loan Amount $150,000 $250,000 $350,000 $450,000
Current Premium $2,625 $4,375 $6,125 $7,875
New Premium $2,700 $4,500 $6,300 $8,100
Additional Premium $75 $125 $175 $225
Increase to Monthly Mortgage Payment $0.37 $0.62 $0.87 $1.12

Based on a 5 year term @ 3.49% and a 25 year amortization

*Premiums in Manitoba, Ontario and Quebec are subject to provincial sales tax — the sales tax cannot be added to the loan amount.

For more information visit http://www.cmhc.ca/en/hoficlincl/moloin/moloin_013.cfm

Continue reading →

IMF urges Ottawa to cut back on mortgage insurance through CMHC

mortgage_getty

Reblogged from Canadian press

Ottawa should consider phasing out insuring home mortgage through Canada Mortgage and Housing Corp., the International Monetary Fund said Wednesday.

The advice is contained in the IMF’s latest economic report card on Canada, which projects modest economic growth of 2.25% for the country next year.

Such a recommendation, surprising from an international financial organization, appears to side with Finance Minister Jim Flaherty, who has recently questioned whether the federal government should be in the business of insuring higher-risk mortgages at all.

Some analysts have credited the system for providing much needed confidence in Canada’s housing sector during the 2008-09 crisis, which many believe was sparked by a crisis in the U.S. mortgage market.

The IMF concedes that the current system has its advantages for stability. But it says it also exposes the government, or taxpayers, to financial system risks and might distort the market as a whole in favour of mortgages over more productive uses of capital.

“We think banks lend too much to mortgages and too little to small and medium enterprises,” Roberto Cardarelli, the IMF mission chief for Canada, told reporters in a briefing in Toronto.

“We suspect the fact that banks may benefit from government-backed insurance on mortgages (…) it sort of makes it easier for banks to do mortgages than other kinds of lending which presumably, we think, is going to be more useful for the real economy.”

The Washington-based financial institutions said further measures should be considered to “encourage appropriate risk retention by private sector and increase the market share of private mortgage insurers.”

Read More … 74 more words