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High-ratio mortgage threshold changed

Canada is reducing the cost of home buying by raising the threshold for compulsory mortgage insurance. An amendment to the Bank Act allows borrowers to access conventional mortgage financing with a 20% down payment. Previously, home buyers were required to make a down payment of at least 25% or they had to pay mortgage default insurance premiums. Bill C-37 raises the loan-to-value ratio requiring mortgage insurance from the current 75 per cent to 80 per cent. High-ratio mortgage insurance will still be required for mortgages greater than 80 per cent of the home’s value. Homebuyers could save an estimated average of $2,500 in insurance premiums, based on an average home price of $300,000. The new limit also affects individuals who intend to refinance their mortgages. In addition to insurance savings, the change will also make it easier to obtain a larger mortgage than previously possible under similar circumstances for a borrower. For refinancing at 80 per cent, there is an extra five per cent equity available to the borrowers for their financing needs.

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