The cost of mortgages for homebuyers with smaller down payments is going up today.
Mortgage default insurance premiums – needed any time buyers have less than a 20 per cent down payment – will increase on March 17, 2017.
The increase is meant to ensure mortgage insurance companies like Canadian Housing and Mortgage Corporation (CMHC) Genworth Financial and Canada Guarantee have larger cash reserves to offset foreclosure losses if there was ever a housing crash.
The premiums are based on the loan amount as a percentage of the home price.
As an example 95 per cent Loan To Value mortgage is currently insured at a rate of 3.6 per cent of the mortgage. For a $100,000 mortgage the premium would work out to $3600 and would typically be added to the mortgage balance.
As of March 17th the premium will be 4.0 per cent for a 95 LTV mortgage and would add $4000 to the $100,000 mortgage balance which is an 11.11 per cent increase in cost.
For home purchases with 10 per cent down, the cost is going from 2.40 to 3.10 per cent.
For home purchases with 15 per cent down, the cost is going from 1.80 per cent to 2.80 per cent.
Here is a full list of the premiums at various LTVs:
| Loan-to-Value Ratio | Standard 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 Payment | 3.85% | 4.50% |
Here is an example of the increase to monthly payments due to the premium increase.
Down payment between 10% and 14.99% Based on a 5 year term @ 2.94% and a 25 year amortization:
| Loan Amount | $150,000 | $250,000 | $350,000 | $450,000 | $550,000 |
|---|---|---|---|---|---|
| Increase to Monthly Payment | $4.94 | $8.23 | $11.52 | $14.81 |
If you have questions about mortgage default insurance premiums, be sure to contact Jason Scott, Edmonton Mortgage Broker
Whether you are a first time buyer or looking to move up the property ladder, Jason Scott will run calculations for you and give you sound advice on how best to structure your mortgage so you can save money.
