Canada's national housing agency (CMHC) has increased the premiums that homeowners, with less than 20 per cent down payments, must pay to insure their mortgages.
Starting in May 2014, the housing agency premiums will range from 0.6 per cent to 3.15 per cent (up from 0.5 per cent and 2.75 per cent). The changes are unlikely to have a major impact on the housing market, but in real-dollar terms, the move makes it slightly more expensive to buy a home.
Under the old system, that borrower would pay an insurance premium of $6,875 to get a $250,000 mortgage. Under the new system, their premium would increase by $1,000 to $7,875. On a typical 25-year mortgage at 3.5 per cent, that person would be paying about $5 more on their mortgage payment, every month.
The increase will only affect new policies, not mortgages already in existence. CMHC said the new rules will apply to owner-occupied units and one-to-four-unit rental properties. It will also apply to self-employed owners.
For further information on this topic, contact CMHC SCHL.
Blog contributor Jennifer Lewis with The Mortgage Centre