Do you really need 20% down for a second property? Try 5%

In the last few years, mortgage rules have "tightened", well, according to the Government.  They would like us to believe that our banking system is strong, prudent and blah blah blah.

Here are the recent mortgage rules that have "tightened" mortgage availability from 0 down and 40 year amortizations to:

Oct 2008 – CMHC: 5% down, 35 yr amortizations, investors need 20% down.
April 2010- CMHC did some minor tightening of their guidelines.
Mar 2011- CMHC: 5% down, 30 yr amortizations,

But what about investors needing 20% down? Is that really true? Yes and no.  To get an 'investment" property, an investor needs 20%, but if you want a "secondary" property, all you need is 5% down.  How the heck does this work?  It is all in the wording.  Gotta love loop holes.

Here is RBC that will finance a second home for only 5% down.
NBA - buy a second home ( year round) with 5% down
- buy a second home ( seasonal) with 10% down
And this totally insured by CMHC.
All the big banks have this going on right now
This is a statement by NBA about second mortgages

There are many reasons for buying a second home: you may be dreaming of a weekend place in the country, a chalet in the mountains, a downtown pied-à-terre for those trips to the big city or even a place for your children to live in while they’re away at university.

Whether it's a seasonal getaway or a year-round home, National Bank’s Second Home Program will help you make your dream a reality.

Over the years, your main residence has almost certainly gone up in value. Why not tap into that equity to make a down payment on a second home or buy it outright?

How many people are out there that would use this program, borrow against their home and say it is a  "secondary" home, but actually just rent it out and hope for a capital appreciation down the road? Think about it, house prices have doubled and even tripled in value over the last decade, and the herd is always famous for chasing gains.  I am sure there are people out there who have lied about the use of the secondary home when applying for a second mortgage, just so they could have more real estate pie. 

So if you really think the recent mortgage rule changes have had any impact on demand, think again. There are loopholes around the changes which some have definitely taken advantage of.
We all know that the recent mortgage rule changes do not have much bite, as subprime lending, 0 down, cash back and free down payment mortgages are still available.

If the Government really wanted to have a prudent mortgage lending system, they would get rid of these programs and be firm with the mortgage rules.