People new to buying houses who have taken insured mortgages will have to pay more than they expected in the beginning because the Canadian Mortgage Housing Corp. has decided to increase the mortgage insurance price for the third time in the past four years.
A government owned insurer explained that the change would only be an addition of $5 a month on top of the typical insured mortgage. This new addition would only apply to the new insured mortgages of few buyers. This new change that puts an additional $5 on top of the mortgage price will be completely implanted on the 17th of March 2017.
This change is a response due to the new requirements implemented for the capital of the mortgage insurers.
Rules from the federal government demand that lenders should collect mortgage insurance from any loan that has a down payment of about 20 per cent. This insurance was implemented mostly to protect lenders against borrowers who plan to evade payment of the loans they took.
This premium increase is actually different from the past ones. This is because the intention of the past ones was aimed at borrowers and usually affected the borrowers with small down payments. However, this premium increase has more of an effect on home buyers with bigger down payments.
For new home buyers with a down payment of 5 per cent, they will see an increase of 40 points on their premiums. However, for house buyers with a fifteen per cent down payment have premiums of a 100 points.
About two-thirds of home buyers that take a Canadian Mortgage Housing Corp. mortgage have down payment of less than 10 per cent.