Loophole may help banks to lend to first-time buyers
Filed Under Main Content · Tagged: Bank Act, Banks, Borrowing Money, Consumers, Default Insurance, Federal Government, Federal Mortgage, Financial Institution, First Time Buyers, Fixed Rate Mortgage, Insurance, Interest Rate, Loophole, Losses, Mortgage Default, Mortgage Insurance, Mortgages, Payment Defaults, Principal Residences, Year Fixed Rate Mortgage
Financial Post- There is a small loophole in the new federal mortgage rules that could make it easier for the banks to lend out money to first-time buyers.
The federal government announced last month new requirements for anyone borrowing money for a house and needing mortgage insurance. If you have less than a 20% down payment and are borrowing from a financial institution covered by the Bank Act, you have to take out mortgage default insurance, which ensures the banks are covered for any losses resulting from payment defaults.
For principal residences, the new rules force consumers to qualify for a loan based on being able to make payments on a five-year fixed-rate mortgage, which has a much higher interest rate than variable mortgages, now as low 1.85%…
