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The-Mortgage-Gal

CMHC premiums rising

CMHC is raising the cost of mortgage insurance effective March 17. 

This increase will mean an extra $5 per month on average.


Here are the new premiums:



The increases will not only affect buyers with less than 20 per cent down, premiums are also increasing on mortgages for buyers who have 20-35 per cent down. 

For a mortgage with 20 per cent equity, the CMHC insurance premium will almost double from 1.25 per cent of the mortgage amount to 2.40 per cent.

The increase to premiums are a result of the new capital requirements set by the Office of the Superintendent of Financial Institution (OSFI) on Jan. 1, 2017 that requires mortgage insurers to hold additional capital.

This requirement protects against potential losses and helps the stability of the financial system over the long term.

Here are some of CMHC's findings:

  • the average CMHC mortgage was about $245,000
  • the average down payment was eight per cent
  • the average gross debt service ratio (GDS) was 25.6 per cent to qualify for CMHC insurance, a homebuyer's GDS should not exceed 32 per cent of their total monthly household income

CMHC's senior vice-president says these changes are not being done to cool the housing market and he does not feel it will affect competition in the market place. 

Monoline lenders, those that offer only a mortgage product, strongly disagree. These higher premiums have caused monoline lenders to charge .25 per cent more on rates for mortgages with more than 20 per cent equity. 

The major financial institutions in contrast do not need to insure the mortgage for securitization.   

This advantage allows them more flexibility in pricing. The average homebuyer is losing out on some preferable products in the marketplace.

If you would like to know more about how these changes will affect you please call 250-862-1806 or email [email protected].

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About the Author

Laurie Baird and Tracy Head are mortgage brokers with Verico Complete Mortgage Services. Together they have over 45 years of experience in the mortgage industry.

As mortgage brokers, Laurie and Tracy spend time getting to know the people they work with and help them understand the mortgage process. They support their clients before, during, and after a home purchase.

Laurie and Tracy are able to offer their clients advice and options. With access to over 40 different lenders, Laurie and Tracy are able to match the needs of their clients with the right mortgage package. They work closely with their clients to find the right fit, and are around to provide support for years down the road!

Contact them at 250-862-1806 or visit:
http://www.okanaganmortgages.com

Visit Laurie's blog at: https://www.okanaganmortgages.com/blog



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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