Consumers buying homes with less than 20% down will now have to pay higher CMHC insurance premiums. CMHC just announced that it will increase premiums for the 3rd time in the last 4 years for people buying homes with less than 20% down.

The changes apply only to new insured mortgages and come into effect on March 17.

The move is a response to stricter new capital requirements for mortgage insurers that the Office of the Superintendent of Financial Institutions introduced at the start of the year.

Federal rules require lenders to take out mortgage insurance for any loan in which the borrower has a down payment of less than 20 per cent. The insurance protects lenders in the event that a borrower defaults on the mortgage, but the premiums are typically added onto the mortgage.

People with 5% down will see their premiums increase by 40 basis points (from 3.6% to 4%) while premiums will rise by 1% for borrowers with down payments of 15%.

This means that more of your equity will be eaten up by the insurance premium even though it won’t drastically increase your payment.
CMHC also announced that it was hiking premiums for “non-traditional” products such as those to home buyers with borrowed down payments.

Below is a recap of the new CMHC Insurance Premiums.

Loan-to-Value RatioStandard Premium (Current)Standard Premium (Effective March 17, 2017)
Up to and including 65%0.60%0.60%
Up to and including 75%0.75%1.70%
Up to and including 80%1.25%2.40%
Up to and including 85%1.80%2.80%
Up to and including 90%2.40%3.10%
Up to and including 95%3.60%4.00%
90.01% to 95% – Non-Traditional Down Payment3.85%4.50%

If you have any questions regarding your own personal situation please contact our office.

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