CMHC reviews their insurance premiums on a regular basis, and based on the increased capital requirements which took effect January 1st 2017 CMHC will be increasing their premiums to have more capital on hand in case of an increase mortgage defaults.
Assuming CMHC follows the same process as previous premium changes, all mortgages approved on or after March 17 2017 will be at the new insurance premium rates.
For Example: The CMHC Insurance Premium on a $400,000 purchase with 5% down is currently $14,400 (3.6%) added to the mortgage. As of March 17th the premium will be $16,000 (4.0%)
The more significant changes are in fact with higher down payments for insured mortgages as can be seen in the Table Below:
The Impact on Canadians: A buyer putting down 10 to 19.99% will see a much larger increase to their insurance premium than those putting down 5-9.99%. Most Canadians do not pay an insurance premium when they put down 20% or more, however, what most Canadians do not know is that many lenders pay the insurance premium behind the scenes so that the mortgage is insured against default, reducing the risk for the lender, increasing the value of the mortgage investment, allowing the lender to offer a lower rate to the borrower. This means that rates for buyers and mortgage renewers with a down payment or equity of 20 to 35% will be offered less competitive rates after March 17th 2017 than today. It also means that if you have a down payment or equity of 35% or more, you will be able to get far better mortgage rates that those with down payments between 20 and 35%.
Given all the changes by the Ministry of Finance and CMHC in the last 90 days, lenders have changed their pricing on mortgage rates depending on purpose (purchase, renewal, refinance), credit score, and down payment / equity, making the search for a mortgage and rate far more complex for Canadians, making the need for a trusted mortgage broker higher than ever.
For a trusted, award-winning mortgage broker to help save you money and manage your mortgage until the day it is paid off, give us a call at 1-877-341-1299.