Homebuyers in Canada are legally required to purchase mortgage insurance if they don't put down 20 per cent of the price of the home up front. The homeowner pays for the insurance, but the lender is the beneficiary — it covers their losses if the homeowner defaults. The vast majority of that insurance is sold through CMHC.
Effective May 1st, CMHC Purchase (owner occupied 1 – 4 unit) mortgage insurance premiums will increase by approximately 15%, on average, for all loan-to-value ranges. For the average Canadian homebuyer requiring CMHC insured financing, the higher premium will result in an increase of approximately $5 to their monthly mortgage payment.
|Loan-to-Value Ratio||Standard Premium (Current)||Standard Premium (Effective May 1st, 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||2.90%||3.35%|
- 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. Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price.
- CMHC mortgage loan insurance premium is calculated as a percentage of the loan based on the loan-to-value ratio. The premium can be paid in a single lump sum but more frequently is added to the mortgage principal and amortized over the life of the mortgage as part of regular mortgage payments.
- CMHC’s new premium rates will be effective for new mortgage loan insurance requests submitted on or after May 1, 2014. The current mortgage loan insurance premiums will apply for applications submitted to CMHC prior to May 1, 2014, regardless of the closing date. As is normal practice, complete borrower and property details must be submitted to CMHC when requesting mortgage loan insurance.
- The increase applies to mortgage loan insurance premiums for residential housing of 1-to-4 units. This includes owner occupied, self-employed and 1-to-4 unit rental properties, including low-ratio refinance premiums.
|Increase to Monthly Mortgage Payment||$3.00||$4.98||$6.99||$8.98|
Based on a 5 year term @ 3.49% and a 25 year amortization
*Premiums in Manitoba, Ontario and Quebec are subject to provincial sales tax — the sales tax cannot be added to the loan amount.
|Increase to Monthly Mortgage Payment||$0.37||$0.62||$0.87||$1.12|
Based on a 5 year term @ 3.49% and a 25 year amortization.
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