CMHC Default Mortgage Premium Increase

19 January 2017
Life and the City

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As you may have already heard, the Canada Mortgage and Housing Corporation (CMHC) just announced an increase to their default mortgage premium rates, effective March 17th 2017.
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Unlike the previous increase in June 2015, which only impacted those with a 5% to 9.99% down payment, this change impacts everyone with less than 20% down. CMHC’s new premium rates will be effective for new mortgage loan insurance requests submitted on or after March 17, 2017. 
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Summary of Default Mortgage Insurance

All buyers with less than 20% available for down payment are subject to a default mortgage insurance premium (“CMHC Premium”). This premium is calculated as follows:

CMHC Premium $ = (Purchase Price – Down Payment) x CMHC Premium %
Rather than the homeowner having to pay the full CMHC Premium $ amount at the time of purchase, the lender allows the homeowner to add this premium to their mortgage and pay for it over their amortization period (i.e., 25 years).
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What is changing?

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CMHC Premium % will be increasing as follows:
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What is the impact?

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Depending on the available down payment and required loan amount of the buyer, this change could add anywhere from $1,000 to $8,500+ to the cost of CMHC insurance.  As lenders allow this cost to be spread over the amortization period (i.e., 25 years), the monthly impact would be in the $5 to $40 range.

Details regarding the potential impact by down payment range are as follows:
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*note: in line with CMHC's press release, a 5-year term at 2.94% and a 25-year amortization was used to illustrate the potential cost of this increase to the homebuyer per month.
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Information courtesy of Joanna Lang, Mortgage Agent with The Lang Team