Higher CMHC Mortgage Insurance Premiums on the Way

If you’re currently in the market for a home, June 1, 2015 is a day you’ll want to circle on your calendar. On this dubious date, CMHC is set to increase mortgage insurance premiums; not surprisingly, first-time homebuyers are expected to be hit the hardest. How much more will you pay in mortgage insurance? Let’s take a closer look.

What Mortgage Insurance and Why Do I Need It?
Depending on the size of your down payment, there are two types of mortgages – conventional and high-ratio mortgages. If you have a down payment of at least 20 per cent you’ll qualify for a conventional mortgage. For those with a down payment between 5 per cent and 19.99 per cent, you’ll need to obtain mortgage insurance.
Although mortgage insurance may seem like a cash grab, and depending on your circumstances it may be, it can actually be a good thing. Without mortgage insurance buyers with less than a 20 per cent down payment would pay a lot higher mortgage rates. Mortgage insurance offers lenders protection if you default on your mortgage – since risk is reduced, lenders are able to offer a more favourable mortgage rate.
How Much More Will I Pay?
Starting June 1st, buyers with less than a 10 per cent down payment will see their premiums increase. Mortgage insurance, which currently ranges from 2.4 – 3.15 per cent of the mortgage amount for the 10 to 5 percent down payment range (90 – 95% of the purchase price mortgages), will increase to a new range of 2.4 – 3.85 per cent. Buyers with a down payment of only 5 per cent will see the stiffest increase, whereas the closer the down payment is to 10 percent, the smaller the effect of these changes will be.
For more information on this change, or other lender and insurer policies, please contact me directly