Insured Buyers are the Majority

Rob McLister, CMT, CanadianMortgageTrends.com

Mortgage insurance is typically mandatory for homebuyers without 20% equity.

Putting down 10% on the average $350,152 home, for example, means you’ll cough up a $6,302 insurance premium (given fully documented income and decent credit). Since insurance premiums are tacked on to your mortgage, that adds up to $9,000+ if you amortize it over 25 years.

Of course, you can avoid insurance altogether by plopping down 20% or more. The challenge is, only a minority of buyers have that sort of equity.

According to the latest data from Will Dunning, Chief Economist of CAAMP, less than 4 in 10 buyers have 20% down payments.

For those purchasing from 2010 through spring 2012:

• 41% had less than a 10% down-payment
• 21% had a 10-19.99% down-payment
• Only 39% put down 20% or more.

(This survey included both first-time and repeat buyers. First-time buyers accounted for 56% of the dataset. Totals don’t add up to 100% due to rounding.)

Given the widespread use of mortgage insurance, it’s easy to see how regulator’s insurance rule changes can rapidly alter home buying trends. In another few months, we’ll get a good sense for how the most recent rule tightening has impacted nationwide mortgage volumes.