Canada Mortgage and Housing Corp., the Crown corp. that controls a majority of the mortgage default insurance market in Canada, said Tuesday it will raise premiums by more than 10 per cent for consumers who put as little as five per cent down on a home.
Here’s how much it’s going to cost you to insure your mortgage
Canadians taking out a CMHC-insured loan to buy a home face higher costs as of March 17. Here’s a look at how the changes announced Tuesday by Canada Mortgage and Housing Corp. will affect new borrowers:
Down payment between five and 9.99 per cent:
Increase to monthly mortgage payment: $4.70
Increase to monthly mortgage payment: $8.47
Increase to monthly mortgage payment: $15.98
Down payment between 10 and 14.99 per cent:
Increase to monthly mortgage payment: $8.23
Increase to monthly mortgage payment: $14.81
Increase to monthly mortgage payment: $27.98
Down payment between 15 and 19.99 per cent:
Increase to monthly mortgage payment: $11.75
Increase to monthly mortgage payment: $21.16
Increase to monthly mortgage payment: $39.96
The figures above are provided by CMHC and are based on a five-year fixed rate term at 2.94 per cent with a 25-year amortization period.
For consumers with a loan to-value ratio up to including 95 per cent, premiums will rise to four per cent on March 17 from the current 3.6 per cent. The largest percentage increase will be premiums for loan-to-value ratios of 90.01 per cent to 95 per cent for non-traditional downpayments which will jump from 3.85 per cent to 4.5 per cent.
“We do not expect the higher premiums to have a significant impact on the ability of Canadians to buy a home,” said Steven Mennill, senior vice-president, insurance with CMHC. “Overall, the changes will preserve competition in the mortgage loan industry and contribute to financial stability.”
The increase had been expected because of new capital requirement put in place for mortgage insurers by the Office of the Superintendent of Financial Institutions for Jan. 1 and the Crown corporation cited the change in announcing the increase.
“Capital holdings create a buffer against potential losses, helping to ensure the long-term stability of the financial system,” CMHC said in its release.
In the past, Genworth Financial and Canada Guaranty, the two private mortgage default insurers, have matched most premium increases from CMHC.
CMHC said for the average homebuyer in its portfolio the higher premium will result in an increase of approximately $5 to their monthly mortgage payment. The average CMHC-insured loan is $245,000. The average down payment was eight per cent with an average gross debt service ratio of 25.6 per cent, below the 32 per cent maximum to qualify for a loan.
Canadians borrowing from a financial institution covered under the Bank Act with less than 20 per cent down must get mortgage default insurance. Premiums are calculated based on the loan-to-value ratio of the mortgage and can be paid in a single lump sum but more often are just added to mortgage and repaid over the life of the loan.