CMHC raises mortgage insurance rates - how they affect you

Mortgage Insurance OntarioThe Canadian Mortgage and Housing Corporation, or CMHC, has announced new mortgage loaninsurance premium increases that go into effect May 1, 2014.


These changes will apply to new applications submitted on or after the deadline, but won't affect existing mortgages, or ones that are applied for before the deadline, even if they close afterward.


What is mortgage loan insurance?


Mortgage loan insurance protects lenders against default when a buyer purchases a property with less than 20% down payment.


It is required by law for mortgages provided by federally regulated financial institutions (FRFIs) within Canada.


It is not the same as mortgage life insurance, which pays your remaining mortgage off in case you die.


The following chart outlines the new rates versus the existing ones.




Similar changes have also been announced for Genworth Canada's mortgage insurance products, that will also go into effect on May 1.

For a purchaser buying a $450,000 home with 5% down payment, the current premium would be $12,375, and the new premium would be $14,175.  Based on a five year term at 3.49% amortized over 25 years, the monthly increase in payment would be $8.98.

For the same purchase with 15% down payment, the current premium would be $7,875, and the new premium $8,100.  The increase in monthly payment would only amount to $1.12.

For details on how the changes may affect your purchase plans, contact me anytime without obligation.


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