CMHC Updates Their Mortgage Loan Insurance Premiums
Effective March 17, 2017, the CMHC is increasing their homeowner loan insurance premiums. For most prospective homeowners, the changes to premiums will result in an additional $5-$10 per month compared to the old premiums.
The change in premiums is due mostly to OSFI’s capital requirements (that came into effect on January 1). Mortgage insurers are required to retain additional capital to act as a buffer against potential losses and ensure the long-term stability of the lender.
How Do These Changes Affect Buyers?
In this example, we’re going to assume that you’re looking to buy a $400,000 home and have a 5% ($20,000) down payment. This means that your mortgage amount will be $380,000.
The current premium (CMHC fee) is 3.6%, or $13,680. This means your total mortgage would be $393,680.
Under the new rates, the CMHC fee is 4%, or $15,200. This means your mortgage effective March 17 would be $395,200.
Assuming a mortgage rate of 2.5% (for easy math) and a 25-year amortization, your monthly payment under the current premiums would be $1,766.11. Under the new premiums that come into effect March 17, your monthly payment would be $1,772.93.
The Rate Sheet – Old vs. New
|Loan to Value Ratio||Current Premium||Premium As of March 27, 2017|
|Up to 65%||0.60%||0.60%|
|66% to 75%||0.75%||1.70%|
|76% to 80%||1.25%||2.40%|
|81% to 85%||1.80%||2.80%|
|86% to 90%||2.40%||3.10%|
|91% to 95%||3.60%||4.0%|
Questions? We’re Always Here to Help
One of the best ways to ensure that your mortgage is set up to protect your interests is to work with a qualified mortgage professional to secure your mortgage. Our professionals have access to a variety of mortgage products from a wide range of lenders.
Get in touch with one of our mortgage professionals if you’re looking for honest advice and experienced insights.