Photo: Dan Moyle/Flickr
The Canada Mortgage and Housing Corporation (CMHC) announced on Friday that it will no longer offer mortgage insurance on second homes and will require self-employed people to provide third-party income validation before they can be insured.
Considering their limited use, the CMHC doesn’t expect the discontinuation of these products to have a significant impact on the Canadian housing market. However, there are several fairly common scenarios in which people will find they’re no longer eligible for CMHC mortgage insurance after May 30th, the date when the Crown corporation officially discontinues the products.
Speaking to Tara Perkins of The Globe and Mail, Drew Donaldson of Safebridge Financial Group said that people who own a condo and decide to rent it out when they buy a house will no longer be able to buy that house with a CMHC-insured mortgage.
The CMHC’s decision has been the talk of the real estate town on Twitter since it was announced on Friday. Here’s what some tweeters had to say about the announcement:
CMHC continues to reduce exposure to risk: Self-employed? Watch out. http://t.co/cH2WIy5MBH
— Gail Vaz-Oxlade (@GailVazOxlade) April 28, 2014
— Jason Kenney (@kenneyjason) April 27, 2014
Looking to purchase a cottage or a home for your child while at University?Your going to need 20% down payment now..http://t.co/4Ziumde1Jb
— Branden Gay (@MT_BrandenGay) April 28, 2014
OSFI confirms that CMHC’s elimination of second home and stated income mortgage insurance was CMHC’s “business decision”
— CMT (@CdnMortgageNews) April 28, 2014
CMHC pulling away from insuring “self employed” people and “second” homes. There are still 2 insures who will write this business…for now
— David Schooley (@RemaxGoingHome) April 28, 2014
— Trent Fraser (@AlmightyTF) April 28, 2014
@Jaytrayne1 Yep, they’re going to have to find a way to deflate this CMHC-fueled gasbag without wrecking the economy in the process.
— Max Fawcett (@maxfawcett) April 28, 2014
A big question now is whether the private mortgage insurers will follow suit
— Ben Rabidoux (@BenRabidoux) April 25, 2014