CMHC Mortgage Insurance Premiums to Rise

The Canada Mortgage and Housing Corporation will charge borrowers a few dollars more every month to insure their mortgages, starting in March.

The housing agency made the announcement in a release Tuesday.

Starting March 17, CMHC will charge mortgage holders slightly more every month to insure their loans.

By law, anyone putting down less than 20 per cent of the purchase price of a home in Canada must pay mortgage insurance, even though the homeowners themselves don't benefit from that coverage. Rather, it's a fee borrowers pay so if they default on loans, their lenders aren't on the hook. Instead, an insurance payout would cover any defaulted loans.

Here's an example of what it could end up costing the consumer.  Let's take a purchase price of $600,000 and the buyer has a 10% ($60,000) down payment.  That leaves $540,000 to insure.  Right now that premium is 2.40% or $12,960 for a mortgage of total mortgage of $552,960.  Based on an interest rate of 2.69%, the monthly mortgage payment will be $2,529.70.

On March 17, 2017 the premium will increase to 3.10% or $16,740 for a total mortgage of $556,740.  The buyer starts off owing $3,780 more and his monthly payment increases by $17.30 to $2,547.00.  

Call your friendly mortgage broker today for information on how this can affect you.