Could we learn from the Canadians?
When it comes to fixing our ailing real estate/housing market, the answer might be yes.
The Vancouver Sun reports that “mortgage insurance has revolutionized the Canadian housing market.”
The policies, which protect lenders in the event of default, were introduced to the Canadian market more than three decades ago.
One senior broker is quoted in the paper as saying, “We just would not see the strong housing market–new and resale alike–that we have enjoyed for the past decade without mortgage insurance.”
He says that without the insurance, most Canadians would have to either come up with a 20 per cent down payment,or have take out high interest second mortgages.
The paper says the average homebuyer in Canada can purchase a property, because of insurance, with as little as five percent down.
One Canadian website recently explained why the housing problems in the United States would not trouble Canada.
Several reasons were given–among them: most mortgage loans in Canada are only for five years with a fixed rate, and mortgage interest is not tax deductible, incentivizing homeowners to pay their notes off much more quickly.
But the other big difference is that, in Canada, “mortgage default insurance is currently required under federal financial services law for those making less than a 20 percent down payment on a property.”
The Canadians are clearly doing something right. They are managing to bring home the bacon (Canadian, of course) because they are managing to keep hold of their homes!
Photo: Mike Baird