Tuesday, March 11, 2014

CMHC Premiums for home purchase will rise as of May 1

Part of my job as your realtor is to keep you informed and help you make the best decisions for yourself.
Of course, saving money is paramount, so….
I wanted you to know about changes that will make it more expensive for anyone buying a home with less than 20% down payment.
In Canada, lenders typically require Buyers with less than a 20% downpayment to pay for mortgage insurance, offered by the Canada Mortgage and Housing Corporation (CMHC).  
The size of the premium is calculated as a percentage of the mortgage and based on the amount of the downpayment - the higher the downpayment, the lower the premium.
On Friday February 28th, CMHC announced that they are increasing CMHC premiums as of May 1st, 2014.
Since most people add the cost of CMHC insurance to their mortgage and pay it over 25 years, the net impact of this increase is estimated to be $5 a month for the average Buyer, however it is important to look at the real-dollar impact of the CMHC increase:
  • For a $250,000 mortgage, a Buyer with 5% down will now be paying an additional $1,000.
  • For a $450,000 mortgage, a Buyer with 5% down will now be paying an additional $$1,800.
  • For a $250,000 mortgage, a Buyer with 15% down will be paying an additional $125.
If you like math, here's the formula for how CMHC Insurance premiums are calculated:

What the Premium Increase Means to the Average Toronto Buyer:

  • The higher your downpayment, the less CMHC insurance premium you will have to pay.
  • To avoid the increased fee, make sure that your lender submits a request for CMHC insurance for you prior to May 1, 2014.
  • The closing date on your new home is irrelevant, but you'll need to have an Agreement of Purchase and Sale in place and have your mortgage in process by May 1, 2014.
What am I really saying?  If you have a 5% downpayment and want to save a couple of thousand dollars, buy a home before May 1st. 
I hope this finds you Happy and Healthy!
All the Best!
A. Mark Argentino
P. Eng. Broker
Specializing in Residential & Investment Real Estate

RE/MAX Realty Specialists Inc.
Providing Full-Time Professional Real Estate Services since 1987

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