CMHC Increasing Mortgage Insurance Premiums

Wednesday Jan 18th, 2017


Effective March 17, 2017, Canada's federal housing agency will be increasing the cost of mortgage loan insurance for homebuyers as part of new regulatory requirements to offset risks in Canada's hot real estate markets, particularly Toronto and Vancouver. It is an attempt to slow down the appreciation of homes by making it more difficult to enter the real estate market. CMHC says the new premium changes are calculated based on the loan-to-value ratio of the mortgage being insured.

Mortgage insurance is required when a homebuyer's down payment is less than 20% of the total purchase price. The cost can be paid in a single lump sum, but CMHC says the amount is often added to the mortgage principal and repaid over the life of the loan. For example, if you are purchasing a $850,000 home with 10% down, you would be required to purchase mortgage insurance for $18,360.

Last year, the federal government introduced a number of measures in order to cool down the real estate market.

In October 2016, all insured mortgages required stress tests to be applied to ensure borrowers would still be able to make their mortgage payments if interest rates rise, or if their financial situations change.

In 2015, the minimum down payment was raised from 5% to 10%, on the portion of any home worth over $500,000.

Will this increase do more harm than good? Leave your comments below

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