You may want to get any insured mortgages before March 17th.
Canada Mortgage and Housing Corporation (CMHC) is raising premiums for insuring mortgages on Canadian homes for the third time in three years. Canadian homebuyers are required to have mortgage insurance if they have less than a 20 per cent downpayment. The insurance provides protection for the lender in the case of a default.
How will it effect you?
The increase is not too significant for those making the minimum downpayment required. A homebuyer with a $250,000 mortgage and a 5 per cent downpayment will pay about $5 per month more in insurance premiums.
The increases are actually targeted towards larger down payments of 15 per cent or more. Those with 20 per cent or more downpayment aren’t required to have mortgage insurance, although it’s used by lenders that securitize their mortgages. As a result, any increased cost will likely be passed on to customers through higher rates.
Premiums are also increasing for “non-traditional” insured mortgages i.e. home buyers with borrowed down payments, a type of mortgage downpayment that could grow in popularity as homebuyers strive to gain entry in the housing market.
This change will not come into effect until March 17. Homebuyers will be able to access the current lower rates if they have bought a home and are approved before the March 17 deadline, even if they have a later closing date.