Attention : GTA Home Buyers - CMHC Raising Mortgage Insurance Premiums
March 11, 2014 @ 12:41 PM by: The Mortgage Providers
If you live in the GTA or surrounding areas and you're in the market for a mortgage, and have less than 20 per cent downpayment, then you might want to get that mortgage before May 2014.
For the first time in more than a decade, Canada Mortgage and Housing Corporation (CMHC) is raising premiums for insuring mortgages on Canadian homes: an average 15 per cent. CMHC is Canada's largest mortgage insurance provider. Private insurer Genworth has followed suit with a matching increase in premiums.
So what does this mean to GTA Home Buyers? As an example, a homebuyer with a $250,000 mortgage and a 5 per cent downpayment will pay an extra $5 per month in insurance premiums (approximately). Make sure to contact Michael Volpentesta, your GTA Mortgage Broker to find out exactly how much the increase will mean to you.
Canadian homebuyers are required to have mortgage insurance if they have less than 20 per cent equity in their homes. The insurance provides protection for the lender in the case of any kind of default. In general, the system works quite well. Canadians have a vested interest in maximizing their downpayment, and in building some equity in their homes, and a prudent mortgage insurance system has contributed to a stable mortgage market in Canada.
The last change in premiums was a decade ago, when CMHC actually lowered the rate they charge. Experts say the increase in premiums is probably overdue - as insurers must hold adequate capital reserves in case of any emergencies.
CMHC expressed plans to announce its premiums in the first quarter of every year going forward. So stay tuned in early 2015 for any more news.
In the meantime, there's no cause for alarm for homebuyers but we do encourage you to contact us if you have any questions. The change will come into effect on May 1st, 2014. Homebuyers will be able to access the current lower rates if they have bought a home and are approved before the May 1 deadline, even if they have a later closing date.
If you live or work in the GTA or surrounding areass we and have questions about any of these items please feel free to contact us at 1-866-398-1323 for more details