That’s how a recent IMF paper characterized Canada’s mortgage market.
Among other things, it compared Canadian and American mortgages and listed several key differences. Here are the big ones:
US mortgages typically don’t have pre-payment penalties. Canadian mortgages usually do (except for “opens,” which are more expensive).
Canadian mortgages are portable. Portability is rare in the US.
US mortgages often have higher origination costs (thanks to “points” and fees) than Canadian mortgages. According to the study, Americans pay $3000-$5000 on a typical purchase, while Canadians pay about $1800.
Rate holds are usually free in Canada. American lenders commonly charge for them.
Mortgage insurance in Canada covers the entire loan amount. In the US, it usually only covers losses above a LTV ceiling (above 80% for example).
In Canada borrowers must pay the entire insurance premium up front. In the US, borrowers pay it monthly and can cancel it when LTV falls below the required threshold (e.g., 80%).
In foreclosure, Canadian lenders have recourse in a borrower’s non-home assets. In the US, that’s usually out of the question due to legalities or costs.
Most US mortgages require payments to be made at the beginning of every month. In Canada, we have weekly, bi-weekly, semi-monthly, and monthly payment options.
Some other notable statistics and conclusions:
Deposit-taking institutions held 62% of Canadian mortgage debt at the start of 2009.
Just 29% of Canadian mortgages are securitized, versus 60% in the US.
45% of Canadian chartered bank mortgages are insured.
Home ownership in the US and Canada are both about 68%, despite US homeowners receiving a mortgage interest tax deduction.
Canada has fewer options than the US when it comes to mortgage terms over 5 years. The author says that’s due to a five-year maturity cap on government-guaranteed deposit insurance, and the Interest Act’s prepayment penalty limit.
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