CMHC Raising Mortgage Insurance Premiums

Last week CMHC announced they would be raising the premiums they charge for mortgage insurance, and this week competitor Genworth made a similar announcement. 

CMHCPremiums 1
CMHC Premiums 

Some people mistakenly think they're buying insurance for themselves when they pay mortgage insurance premiums, when in fact the insurance helps protect the mortgage lender against defaults. The insurance enables buyers to purchase property with a 5%-20% down payment, with interest rates comparable to those with a down payment over 20%. Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price.

The premium rates will apply for loan requests made on or after May 1, 2014. In their statement regarding the premium increases, CMHC said the new rates are not expected to have a material impact the housing market, since the premiums will only add $5/month to the average mortgage payment. When you look at the premiums on a $350,000 mortgage, with 5% down, the total additional fee is only $175. Would you change your mind on buying a home over $175? I have to agree with CMHC that this will have little to no impact on the market in Edmonton this year.

About 

Sara MacLennan is the Director of Marketing at Liv Real Estate and a licensed Real Estate Associate. The bulk of Sara’s experience and wealth of expertise lies in on-line technology and marketing both for agents and consumers. Sara is the former National Director for Interactive Marketing for Coldwell Banker Canada where she was responsible for an extensive training program traveling to offices across the country training agents and brokers on marketing and technology. Find Sara on Twitter @edmontonblogger.

del.icio.us Digg

6 Responses to “CMHC Raising Mortgage Insurance Premiums”

  1. Inspector GadgetNo Gravatar 05. Mar, 2014 at 9:22 pm #

    Many uniformed buyers also don’t understand (or care) that the premium is often amortized over the length of the mortgage and subject to interest.
    Debt….tick tick….

    • GMNo Gravatar 06. Mar, 2014 at 5:15 am #

      What kind of uniform? Police? Nurse?

  2. DaveNo Gravatar 06. Mar, 2014 at 9:31 pm #

    with 5% down, the total additional fee is only $175. Would you change your mind on buying a home over $175?

    The fee is actually $1400.

    • Sara MacLennanNo Gravatar 07. Mar, 2014 at 11:40 am #

      Hi Dave,

      Thanks for your comment, I didn’t word that sentence very well. What I meant was the difference between the current premium, and the new premium is $175 in that example. Hope that clears things up. Sara.

      • DaveNo Gravatar 07. Mar, 2014 at 10:48 pm #

        Sorry Sara,the difference in the premium in your example is $1400.

  3. TarazNo Gravatar 07. Mar, 2014 at 10:21 am #

    It’s also interesting to note that while Alberta is a non-recourse mortgage province, this does not apply to CMHC loans. In case of a catastrohic housing collapse (which seems unlikely in Alberta at this point), if your house dropped 40%, you could walk away from your 20% down mortgage without any further penalty. Meanwhile, you can’t walk away from a CMHC loan (CMHC will chase you for any deficit).

    Unlike the US, where private mortgage insurance (PMI) is the norm, CMHC is backed by the tax payer. Accordingly, Canadian bank stocks are generally a very safe investment (since the taxpayers carry most of the risk).