CMHC Premiums Increasing

Effective May 1, 2014, Canadian Mortgage and Housing Corporation (CMHC) will be increasing their homeowner mortgage loan insurance premiums.

Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price when buying a home.  This insurance protects the lenders against mortgage default and enables people who purchase homes with only 5% down access to interest rates comparable to those available to people who have 20% or more as a down payment.

The CMHC mortgage loan insurance premium is calculated as a percentage of the loan based on the loan-to-value ratio.  The premium can be paid in a single lump sum at time of funding, or more frequently it is added to the mortgage principal and amortized over the life of the mortgage and becomes part of the regular mortgage payments.

As of May 1^st CMHC premiums for owner-occupied 1-4 unit properties will be:

Loan to Value Ratio                        Current Premium              New Premium

Up to and including 65%                     0.50%                                  0.60%
Up to and including 75%                     0.65%                                  0.75%
Up to and including 80%                     1.00%                                  1.25%
Up to and including 85%                     1.75%                                  1.80%
Up to and including 90%                     2.00%                                  2.40%
Up to and including 95%                     2.75%                                  3.15%
90.01% to 95% non-traditional          2.90%                                  3.35%
Down payment

For the average Canadian homebuyer requiring CMHC insured financing; the higher premium will result in an increase of approximately $5 to their monthly mortgage payment.  This increase is not expected to have an impact on the housing market.

The increase will apply to mortgage loan insurance premiums for owner occupied, self-employed and 1-to-4 unit rental properties, including low-ratio refinancing.  

CMHC’s new premium rates will be effective for new mortgage loan insurance requests submitted on or after May 1, 2014.  If you are purchasing a home and require CMHC, in order to qualify for the existing mortgage loan insurance premiums, you must have your lender submit your request to CMHC before the May 1^st cut off, regardless of the date of your home purchase. 

Here is an example of a Loan with a 95% loan-to-value ratio (or 5% down payment), based on a 5 year term @ 3.49% and a 25 year amortization:

Loan Amount                     $150,000             $250,000             $350,000             $450,000

Current Premium              $4,125                 $6,875                  $9,625                $12,375
New Premium                   $4,725                  $7,875                  $11,025               $14,175
Increase                              $600                     $1,000                  $1,400                 $1,800
Increase to Monthly        $3.00                    $4.98                     $6.99                   $8.98
Mortgage payment
 
If you have any questions, or would like more information give me call.

Have a great weekend,

Tracey

Source:  CMHC cmhc-schl.gc.ca

All mortgage related transactions are provided by Centum One Financial Group.  Any information in the enclosed note is provided by Tracey Marshall who is a registered mortgage agent under the Financial Services Commission of Ontario.  Centum One Financial Group is not affiliated or related to Security Financial