For homeowners with CMHC-insured mortgages, payments will increase an average of $5 a month, but hike varies significantly with loan amount
REW
CMHC mortgage loan insurance premiums will increase from March 17, 2017, the federal housing agency announced January 17.
For homeowners who put down less than 20 per cent down payment, and insured their mortgages with CMHC, the average increase in monthly payments will be just short of $5.
However, this increase varies significantly depending on the loan amount. Those who have a $250,000 mortgage will see a $4.70 monthly increase, as this is close to the average Canadian insured mortgage of $245,000. The monthly increase in premiums on mortgages of $150,000 will be $2.82.
In Greater Vancouver, homeowners are likely to see higher average payment hikes, as the average mortgage in the region is above that of the Canadian average. The CMHC said that the increase on loans of $450,000 would be $8.47 per month, and nearly $16 for those with insured mortgages of $850,000.
And for those with larger down payments, monthly premiums will increase significantly more. For example, those with $350,000 mortgage and a 10 per cent to 14.99 per cent down payment will see an increase of $11.52 a month, while those with a down payment between 15 to 19.99 per cent on the same loan will pay $16.46 more a month.
Those with a $660,000 loan will have to pay $20 more a month for their CMHC insurance premium if they have 10 per cent down payment, based on a 25-year amortization period at a fixed five-year rate of 2.44 per cent. And payments rise by nearly $40 a month for a buyer with a 15 per cent down payment on an $850,000 mortgage.
Around two-thirds of home buyers with a CMHC-insured mortgage have down payments of less than 10 per cent, which means that for most new home buyers the monthly payment increase will be “negligible,” said Steven Mennill, CMHC’s senior vice-president of insurance.
He said, “We do not expect the higher premiums to have a significant impact on the ability of Canadians to buy a home. Overall, the changes will preserve competition in the mortgage loan insurance industry and contribute to financial stability.”
The CMHC’s statement said, “Capital requirements are an important factor in determining mortgage insurance premiums. The changes reflect OSFI’s new capital requirements that came into effect on January 1 of this year that require mortgage insurers to hold additional capital. Capital holdings create a buffer against potential losses, helping to ensure the long term stability of the financial system.”
© 2016 Real Estate Weekly