Connect with us

Canada

CMHC Raising Rates to Issue New Mortgage Insurance

Published

 on

CMHC Raising Rates to Issue New Mortgage Insurance

[caption id="attachment_80669" align="alignleft" width="279"]CMHC Raising Rates to Issue New Mortgage Insurance CMHC Raising Rates to Issue New Mortgage Insurance
[/caption]The state-owned enterprise or Crown Enterprise known as the Canada Mortgage and Housing Corporation (CMHC) has announced that it will be raising the rates it charges for mortgage insurance premiums, but the rate change will only affect new mortgages being issued. The rates will now be graduated and will be inversely proportional to the percentage of down payment the prospective home owner is willing to make for the down payment. Like the CHMC's US counterpart, the government sponsored enterprise called the Federal Housing Authority (FHA), mortgage insurance is required whenever the amount of the down payment is less than 20% of the home's purchase price.

The purpose of mortgage insurance is to safeguard the principal the lender is issuing to the buyer in the event the homeowner defaults on the repayment of the loan. Buyers making a 10% down-payment will experience a 20% increase in their mortgage insurance premium from 2% to 2.4%. Buyers able to put down 15% of the home's purchase price will see a modest premium increase to 1.8% from 1.75%. Put another way, a buyer purchasing a home for $100,000 and putting 10% down will pay $2,160 for their mortgage insurance premium. The same buyer making a 15% down payment would only pay $1,530.

Borrowers are allowed the option of financing the mortgage insurance premium over the period of time that it would take to pay down a sufficient amount of the principal to have an 80-20 loan-to-value. While the rate changes will increase the cost of the mortgage insurance by several thousand dollars on higher priced homes purchased with smaller down payments, it will amount to only a nominal $5/mos. more on the average monthly mortgage for those financing their mortgage insurance premiums into the loan. The rate changes will take effect on May 1, 2014.

Source:
CMHC Raising Rates to Issue New Mortgage Insurance
http://www.thetelegram.com/Business/2014-02-28/article-3630521/CMHC-raising-rates-for-mortgage-insurance/1

Sean is a London (Ontario) based writer, and has been writing full-time for eCanadaNow since May of 2005, covering Canadian topics and world issues. Since 2009, Sean has been the lead editor for eCanadaNow. Prior to his work writing and editing for the eCanadaNow, he worked as a freelancer for several Canadian newspapers.. You can contact Sean at {Sean at ecanadanow.com] Google

Canada

How to Embark on a Career in Public Safety or Policing

Published

 on

Continue Reading

Advertiser Disclosure: ECanadaNow is committed to rigorous editorial standards to provide our readers with accurate information. We may receive compensation when you click on links to products we reviewed.