What the CMHC premium hike means for you + MORE Mar 19th

With mortgage insurance premiums rising, homebuyers whose down payments are just shy of 20 per cent may be considering whether to tap extra sources of credit in order to avoid the higher costs.
But mortgage brokers say recent government rule changes lessen the case for doing so because people may end up paying a higher interest rate on their mortgage in addition to the additional debt they will have to repay.
“What we’re seeing in the market now is people that have insured mortgages are getting much better interest rates than someone with 20 per cent down,” says Steve Pipkey, co-founder of Vancouver-based Spin Mortgage.
Ottawa announced new restrictions last fall to portfolio insurance, a type of bulk insurance that lenders would use to insure mortgages with down payments of 20 per cent or more.
That has made it more difficult for lenders to insure mortgages with lower loan-to-value ratios and resulted in more competitive rates for borrowers with smaller down payments, brokers say…

Toronto’s runaway house prices could threaten the city’s economy if even the wealthiest one per cent of earners find themselves priced out of the market, as is now happening, the Bank of Montreal’s economics branch is warning.

BMO chief economist Douglas Porter crunched the numbers and found that someone earning $225,000 a year — right at the cutoff line for being in the one per cent — would not be able to afford to buy an average-priced single-family home in Toronto.

Read more:

New York Metro Area Now More Affordable Than Greater Toronto, Vancouver
12 Charts About Canadian Housing That Will Make You Go WTF
Toronto’s Housing Bubble Has 24 Months To Live: BMO

That’s despite the fact this earner would be considered rich under tax rules. Anyone in Ontario earning above $220,000 pays a combined top marginal tax rate of 53.53 per cent.

Taking into account the “stress test” for mortgages that the federal Liberals instituted last year, Porter estimated that a couple earning $225,000 with $100,000 for a down payment would be able to afford a house of $987,289…

By Dustan Woodhouse, Special to CMT Regulators have made several changes to the mortgage market each year since the 2008 financial crisis. The most recent changes are the most disruptive—to the industry, to clients who seek competitive low rates and to mortgage insurance premiums. Ironically, the moves have resulted in increased rates and insurance premiums for better qualified applicants. Yes, you read that correctly, you now pay higher rates and/or higher premiums for being a higher calibre less risky borrower. But that’s a separate story for a different day. While many of Ottawa’s changes have strengthened the overall foundation of the financial system (should any shocks READ MORE

The CMHC is raising mortgage insurance premiums as of today.
Luckily, if you already have a mortgage or if you applied for one before March 17, these changes won’t affect you. If you’re planning to buy a home with a down payment of less than 20%, however, be aware that you’ll have to pay a little more every month—which adds up to quite a lot over a typical 25-year amortization period.
The premium rates for new mortgage loan applications are as follows:

Down payment %
Standard premium (current)
Standard premium (before March 17)

5% to 9.99%
4%
3.6%

10% to 14.99%
3.1%
2.4%

15% to 19.99%
2.8%
1.8%

Depending on where you live in the country and the price of your home, you could pay anywhere between $2 and $17 extra a month in CMHC premiums. On average, Canadians could pay an extra $2,600 over the course of 25 years.
RateHub has crunched the numbers to show Canadians exactly how much more they can expect to pay monthly across the country. See their helpful infographic below…