TORONTO – Effective June 1, 2015, home buyers planning to shell out a down-payment of 10 per cent or less will be facing slightly higher premiums on their insurance from the Canadian Mortgage and Housing Corporation (CMHC).
The increase, which applies to insured mortgages for “residential housing of one and two units,” will see those premiums increase by “approximately” 15 per cent – or roughly $5 per month for most mortgages. The June 1 change will affect two types of loan-to-value ratios:
- For home buyers with a loan-to-value ratio of up to 95 per cent, the standard premium will jump from 3.15 per cent to 3.60 per cent.
- For buyers making a “Non-Traditional Down Payment,” with a loan-to-value ratio of 90.01 per cent to 95 per cent, the standard premium will increase from 3.35 per cent to 3.85 per cent.
According to Steven Mennill, Senior Vice President (Insurance) at CMHC, the slight increase is related to the Corporation’s decision, in August of 2014, to increase its capital holding target from 200 per cent to 220 per cent of the Office of the Superintendent of Financial Institutions (OFSI)’s set minimum requirements.
“CMHC completed a detailed review of its mortgage loan insurance premiums and examined the performance of the various sub-segments of its portfolio,” said Mennill in a CMHC statement issued April 2.
“The premium increase for homebuyers with less than a 10 per cent down payment reflects CMHC’s target capital requirements.”
There is, however, a silver lining for buyers: if a request for mortgage loan insurance (prepared and submitted by the lender) is sent before June 1, 2015, then the current insurance premiums will still apply to insurance on that mortgage if the request is successful. Regardless of closing date, requests for insurance received on or after June 1 will not be eligible for the lower insurance premium currently in effect.
If you may be affected by this change, speak to your mortgage broker about how this may affect your borrowing costs or the mortgage you can afford.
For more information on obtaining mortgage insurance in Canada, we recommend taking a look at CMHC’s comprehensive online guide for consumers: https://www.cmhc-schl.gc.ca/en/co/moloin/