The Canada Mortgage and Housing Corporation (CMHC) is increasing its homeowner loan insurance premiums later this year.
Effective March 17, 2017, premiums will be changing as follows:
|Down payment %||Standard premium (current)||Standard premium (as of March 17, 2017)|
|5% to 9.99%||3.6%||4%|
|10% to 14.99%||2.4%||3.1%|
|15% to 19.99%||1.8%||2.8%|
For the average CMHC-insured homebuyer, the organization says the increase means they’ll pay an average of $5 more a month on their monthly mortgage payment.
“We do not expect the higher premiums to have a significant impact on the ability of Canadians to buy a home,” says Steven Mennill, CMHC’s senior vice-president, insurance.
The changes reflect the Office of the Superintendent of Financial Institution’s new capital requirements that came into effect this year requiring mortgage insurers to hold additional capital.
It’s expected that private insurers Genworth Canada and Canada Guaranty will also raise their insurance premiums to match what CMHC plans to charge.
Here are a couple of examples of how the increase in premiums will affect a Toronto homebuyer:
Using the average Toronto home price of $730,472 (according to the Canadian Real Estate Association) with a minimum down payment of 6.6% (or $48,047), the current premium is 3.6% of the mortgage amount (purchase price less down payment). If the mortgage amount of $682,425, the CMHC premium is $24,567.
With the new premium at 4% of the mortgage amount, the CMHC premium becomes $27,297—an increase of $2,730. This translates to a mortgage payment increase of about $12 per month (based on today’s best mortgage rate of 2.44%, amortized over 25 years).
If that buyer makes an 18% down payment on an average Toronto home priced at $730,472, the total down payment will be $131,485. At the current premium of 1.8% of the mortgage amount, the buyer will pay $10,782 in CMHC insurance.
At the new premium of 2.8% of the mortgage amount, the CMHC premium becomes $16,772—a $5,990 difference for the buyer. This translates to a mortgage payment increase of about $27 per month (based on today’s best mortgage rate of 2.44%, amortized over 25 years).