Are you considering a home purchase in the next few months? Will you be obtaining a "high ratio" mortgage with at less than 10% of the purchase value as a downpayment? If so, here's something you'll need to know.
The Canada Mortgage and Housing Corporation (CMHC) has announced their mortgage default insurance (MDI) rates are going up on June 1, 2015 for mortgages where the downpayment is less than 10%.
The Canadian Real Estate Association (CREA) reports "For the average Canadian homebuyer with less than a 10% down payment, CMHC premiums will rise by 0.45% to 3.6% which translates into an increase of $5 in monthly mortgage payments; for those with a “non-traditional” down payment of less than 10%, premiums will increase by 0.5% to 3.85%, or about $6 per month."
Now these certainly are not big changes to rates and costs however buyers need to understand how the extra fees go into effect. CREA further states "The changes do not apply to mortgages currently insured by CMHC and the current premiums will apply to all MDI applications to CMHC before June 1, 2015, regardless of closing date."
So if you want to save those few extra bucks, you may want to find your perfect home and get your CMHC application done before June 1, 2015. As long as the application is in before then, the old rates will apply even if the closing date isn't until late summer. Give your favourite bank, credit union or mortgage broker a call for more details.
 In 2014, the average CMHC insured loan at 95% loan-to-value (LTV) was $252,530. Calculation of the difference in monthly payments based on a LTV of 95%, loan amount of $250,000, 5-year mortgage term, 2.79% mortgage interest rate, and loan amortization of 25 years.