(Slight) Changes Coming to CMHC Mortgage Insurance
UPDATE: Since the CMHC premium hike, the largest private mortgage insurer, Genworth, has announced that its premiums will increase to match CMHC’s effective May 1.
The Canadian Mortgage and Housing Corporation has announced 15 per cent increases to the premiums on its mortgage insurance. These will come into effect for new CMHC-insured mortgages taken out May 1, 2014 or after.
- If you already have a CMHC-insured mortgage or mortgage approval, your premiums will stay the same.
- If you refinance and still require CMHC insurance, your premiums will then go up.
- If you submit an application to CMHC before May 1, your premiums will be at the old rate. Therefore, if you plan to buy a home soon and have a down payment of five to 20 per cent, you can save yourself about $5 per month by buying and nailing down your mortgage before the May 1 deadline. Check with an independent mortgage broker to find out how much you qualify to borrow so you can search within your price range.
- If you take out a mortgage after May 1 that requires CMHC insurance , these will be your premiums.
Mortgage insurance is required on all mortgages that meet these criteria:
- Down payment of 5-to-20 per cent of home’s value
- Maximum amortization period: 25 years
- Maximum home price: $999,999
- Maximum amount to refinance a mortgage: 80 per cent of home’s value
You can only qualify for CMHC insurance if your maximum gross debt service (GDS) is 39 per cent and your maximum total debt service (TDS) is 44 per cent. These numbers refer to the percentage of your income needed for all housing costs (GDS) and the percentage required for GDS plus other debts (TDS). Some lenders may have more stringent guidelines.
Again, a mortgage broker can give you guidance.
The CMHC insurance-premium increase is not expected to affect the Canadian housing market.