Higher Mortgage Insurance Premiums come into effect May 1st for owner occupied, self-employed and 1-to-4 unit rental properties, including low-ratio refinance premiums. In February, the CMHC released a press release stating this increase. CMHC’s new premium rates will be effective for new mortgage loan insurance requests submitted on or after May 1, 2014. The current mortgage loan insurance premiums will apply for applications submitted to CMHC prior to May 1, 2014, regardless of the closing date.
What is Mortgage Loan Insurance (or Mortgage Default Insurance)
This insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price and protects lenders against mortgage default and enables consumers to purchase homes with a minimum down payment of 5% with interest rates comparable to those with a 20% down payment.
How Mortgage Loan Insurance Assists the Consumer
Mortgage Loan Insurance helps home buyers who do not have a large downpayment realize the dream of homeownership.
How Much are Insurance Premiums?
Comparemyrates.ca has CMHC Calculator that will assist in calculating premiums. Premiums are based on the amount of the mortgage and the higher the percentage of the total house price/value that you borrow, the higher percentage you will pay in insurance premiums. This increase will amount to approximately $5 on a monthly mortgage payment based on the average CMHC insured loan at 95% loan-to-value of $248,000.
Although not a large increase, you can offset the cost, plus save money over the life of your mortgage by getting an experienced mortgage broker who will find you the best mortgage rates and mortgage products to fit your particular situation. By mortgage rate shopping, you can save thousands of dollars on your mortgage.