Connected To More
Signed in as . Sign Out.

Mortgage Default Insurance Premium Rising June 1, 2015

In the market to purchase­ Have less than 10% to put down­ You will want to have that offer on the home accepted in the next couple weeks. Earlier this year, CMHC announced its premiums­would be increasing by approximately 15% as of June 1.­ This is the second time these premiums have been increased in the last 13 months. Canada’s other default insurance companies- Genworth and Canada Guaranty-are following suit with the premium increases.

Currently, if you purchase a home with 5% down, you are paying an insurance premium of 3.15% to do so. As of June 1, this figure will increase to 3.6%.

Currently, if you­purchase a $400,000 home with 5% down, your default insurance premium is $11,970. As of June 1, the same scenario will cost you $13,680.­The difference­ $1710. Some people are pointing out that the increase isn’t really that much. And on this scenario, or a lower priced home, their statement is valid. And with this scenario, on a monthly basis- they may be right in saying so too. The new scenario will cost just $7.82 more each month at the current 5 year fixed rate of 2.69%. Like your mortgage payments,­your default insurance premium is amortized over 25 years.

However, it’s the big picture people tend to forget. At the end of this­5 year mortgage term, for example, the new scenario has paid an additional $469.20 in mortgage payments, and has paid the mortgage down $1453.01 LESS than the current scenario. The actual difference looks more like $1922.

All mortgage commitments made prior to June 1, regardless of the closing date, will remain at the current default insurance premium. Happy house hunting!

Pin It