Toronto Homes

CMHC Moves to Increase Mortgage Insurance Premiums

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GREATER TORONTO – Aspiring homeowners looking to pay less than 20 per cent down may want to consider finishing their purchase before March 17, when the Canada Mortgage and Housing Corporation will put into effect a slight premium increase affecting all new mortgages protected by the insurer.

Effective immediately on that date, owners who purchase new homes with a down payment of between 5 and 9.99 per cent will pay slightly higher premiums as follows:

  • $2.82 for a loan of $150,000
  • $4.70 for a loan of $250,000
  • $6.59 for a loan of $350,000
  • $8.47 for a loan of $450,000
  • $10.35 for a loan of $550,000
  • $15.98 for a loan of $850,000

The good news for existing homeowners, however, is that the new premium rates will only be effective for new mortgage loans submitted on or after March 17. Applications submitted prior to the date will be subject to the existing (slightly lower) premiums, regardless of the transaction’s closing date.

The CMHC’s statement noted that, during the first nine months of 2016, the average CMHC-insured loan was approximately $245,000.

The Corporation also explained that this newest change was designed to reflect new capital requirements from the Office of the Superintendent of Financial Institutions (OFSI), which took effect on January 1 – and, effectively, required mortgage insurers to carry higher levels of capital.

“We do not expect the higher premiums to have a significant impact on the ability of Canadians to buy a home,” said Steven Mennill, Vice President of Insurance at CMHC.

“Overall, the changes will preserve competition in the mortgage loan insurance industry and contribute to financial stability.”

Before submitting any mortgage insurance application, it is always recommended to speak with a qualified mortgage broker, who can not only help you compare quotes, but assist you with understanding and navigating the CMHC’s guidelines and processes.

Quick Facts: CMHC’s Mortgage Insurance Premiums

  • Premiums are calculated based on the loan-to-value ratio of the mortgage being insured.
  • While a premium may be paid in a single lump sum, it is more common for it to be added to the mortgage principle, and repaid (along with regular payments) over the mortgage’s lifespans.
  • CMHC regularly reviews its premiums. Adjustments are made for two reasons:
    • To cover related claims and expenses;
    • To reflect regulatory capital requirements, such as the newest ones implemented by OFSI.

*CAD. Based on a five-year term at 2.94 per cent, and a 25-year amortization.

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