Dan Welyk Realtor®  Since 1999

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If you're planning to buy a home in the near future with less than 20% down, expect to pay more in mortgage default insurance.

 

Canada Mortgage and Housing Corporation (CMHC) announced today that it will be increasing its mortgage default insurance premiums to reflect CMHC's higher capital targets. The Crown corporation has received a lot of heat in recent months for exposing tax payers to unnecessary risk, and apparently this is its way of combating that. 

 

According to CMHC, the new changes will amount to approximately $5 a month in additional mortgage payments for the average mortgage holder. The changes also won't affect homeowners who already have mortgage default insurance.

 

Mortgage default insurance protects lenders should a homeowner default on their mortgage. It's paid by the home owner, and is required if you have less than a 20% down payment, or if the lender deems it necessary for other reasons (say, if you have a lower-than-ideal credit score or if you're self-employed). 

 

New rate schedule is as follows:

Loan-to-Value Ratio (LTV)

(100% - Down Payment% = LTV)

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%

 

If you'd like to learn more about the changes, you can read CMHC's news release here. And as always, we're available to discuss how these changes affect your specific situation.

 

About the Author

Andrew Sikomas

Andrew Sikomas is a professional mortgage and financing consultant based in Calgary, Alberta. A keen personal interest in finance and real estate drew him into this business, and never let him go!  Visit Andrew's Website.

 

Read other articles by Andrew Sikomas

 

 

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