Last night I was having a discussion with a co-worker about the current real estate market downturn.
- Prior to 1999 you needed 10% for a mortgage and that mortgage had a maximum amortization of 25 years. CMHC also had limits on how much you could buy with their insurance.
- CMHC then lowered the down payment to 5% down with price limits depending on the area. Amortizations were 25 years. There would be no price limit on what they would insure if 10% or more was put down.
- By Sept. 2003 CMHC allowed 5% down on 25 yr amortizations but they removed all price ceiling limitations. Now any mortgage would be insured regardless of the value of home purchased.
- March 2004 CMHC began allowing Flex-Down products which permitted the 5% down to be borrowed and 1.5% closing costs to be borrowed (essentially zero down, but 95% insured.
- March 2006 you had 0% down, 30 yr amortizations. This became 0% down, 35 yr amortizations later in the year. Interest only payments were allowed for 10 years.
- November 2006 CMHC began allowing 0% down, 40 yr amortizations along with interest only payments for 10 years.
- Canadian banks ramped this up by allowing up to 7% cash back offers is you would take on a mortgage with them. You could basically get paid if you bought a house.
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