Effective May 1, 2014, the Canada Mortgage and Housing Corporation (CMHC) will be increasing its mortgage insurance premiums after the annual review of their insurance product and capital requirements.
Those affected include owner occupied units, self-employed, and 1-4 unit rental properties. The increase will not apply to mortgages currently insured.
“The higher premiums reflect CMHC’s higher capital targets,” said Steven Mennill, CMHC’s Vice-President, Insurance Operations. “CMHC’s capital holdings reduce Canadian taxpayers’ exposure to the housing market and contribute to the long term stability of the financial system.”
The average Canadian homeowner affected by the increased premiums will experience around a $5 increase to their monthly mortgage payments. The premiums will rise approximately 15% on average for all loan-to-value ranges:
Chart via CMHC
Standard Premium (Current)
Standard Premium (Effective May 1st, 2014)
Up to and including 65%
Up to and including 75%
Up to and including 80%
Up to and including 85%
Up to and including 90%
Up to and including 95%
90.01% to 95% – Non-Traditional Down Payment
What is mortgage default insurance?
The CMHC’s mortgage default insurance protects lenders against mortgage defaults. More importantly, it allows homebuyers to purchase homes with only 5% down with interest rates comparable to a downpayment of 20%. Mortgage default insurance is necessary whenever a homebuyer puts less than 20% down.