The CMHC recently announced that as of March 17, 2017 they will be increasing their homeowner loan insurance premiums. For most prospective homeowners these changes to premiums will likely result in an additional $5 to $10 per month compared to their old premiums.
This change is coming in to affect mostly due to OSFI’s change in capital requirements, which came into effect on January 1, 2017. Under these new requirements mortgage insurers are now required to retain additional capital to act as a buffer against potential losses and ensure the long-term stability of the lender.
How Do These Changes Affect Buyers?
These changes have the potential to affect home buyers. For example:
Assume you are looking to buy a home that costs $400,000 and have a 5% down payment ($20,000). In this scenario, your mortgage will amount to $380,000
The current premium (CMHC fee) is 3.6%, or $13,680. This means that the total cost of your mortgage is $393,680.
However, under the new rates, the CMHC fee will be raised to 4%, or in this case $15,200. This means that as of March 17, 2017 the total cost of your mortgage is now $395, 200. Assuming a mortgage rate of 2.5% (for easy math) and a 25-year amortization rate your monthly payment under the current premiums would be $1766.11. Under the new premiums, your monthly payment would increase to $1772.93.
The Rate Sheet – Old vs New
|Loan to Value Ratio||Current Premium||Premium as of March 17, 2017|
|Up to 65%||0.60%||0.60%|
|66% to 75%||0.75%||1.70%|
|76% to 80%||1.25%||2.40%|
|81% to 85%||1.80%||2.80%|
|86% to 90%||2.40%||3.10%|
|91% to 95%||3.60%||4.00%|