As of May 1, 2014, CMHC (otherwise known as the Canada Mortgage and Housing Corporation) is set to increase the mortgage loan insurance premiums for home owners.
The increase applies to mortgage loan insurance premiums for owner occupied, self-employed and 1-to-4 unit rental properties, including low-ratio refinance premiums. This does not apply to mortgages currently insured by CMHC.
Mortgage loan insurance is typically required by lenders when home buyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with a minimum down payment of 5% — with interest rates comparable to those with a 20% down payment.
To obtain mortgage loan insurance, lenders pay an insurance premium. Typically, your lender will pass this cost on to you. The premium payable is based on a percentage of the home’s purchase price that is financed by a mortgage. The premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments.
What Does this Mean for You?
For the average Canadian home buyer requiring CMHC insured financing, the higher premium will result in an increase of approximately $5 to their monthly mortgage payment. This is not expected to have a material impact on the housing market.
|Standard Premium (Current)||Standard Premium (Effective
May 1, 2014)
|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 Down Payment
For more information on CMHC’s mortgage insurance rate increase, click here.