Morgage Insurance

Canada's national housing agency has increased the amount of money that homeowners with less than 20 per cent down payments must pay to insure their mortgages.

Starting in May, the housing agency will charge an average of about 15 per cent more to insure mortgages, CMHC said in a release Friday.

Prior to the announcement, the premiums ranged between 0.5 per cent and 2.75 per cent. Under the new rules, they will range from 0.6 per cent to 3.15 per cent.

The changes are unlikely to have a major impact on the housing market, but in real-dollar terms, the move makes it incrementally more expensive to buy a home. A heavily leveraged buyer — someone with only five per cent down, and therefore borrowing 95 per cent of the home's value — would be most impacted by the hike, but even then not in a significant way.

Under the old system, that borrower would pay an insurance premium of $6,875 to get a $250,000 mortgage. Under the new system, their premium would jump by $1,000 to $7,875. On a typical 25-year mortgage at 3.5 per cent, that person would be paying about $5 more on their mortgage payment, every month, to pay down the fee.



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John Gratto

John Gratto

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CENTURY 21 B.J. Roth Realty Ltd., Brokerage*
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