20th March, 2017
10th April, 2017
When you purchase a new home but don't have a 20% down, like the majority of first-time buyers in 2017, the lender will require you to insure the mortgage against default. The premium you pay for this insurance is based on how large of a down payment you make.
On March 17, 2017, CMHC raised its rates it charges for insurance. CMHC estimates the increases will only cost the average home buyer an additional $5 in their monthly mortgage payment.
CMHC stands for Canada Mortgage and Housing Corporation. CMHC is Canada's largest crown corporation and generates about $14 billion in revenue for the federal government in Canada.
CMHC Insurance Premium by Down Payment Size (25 year amortization period)
According to CMHC, the average down payment on a CMHC loan is approximately 8%. In this case, you will pay 4% of the home purchase price to obtain mortgage insurance.
It's questionable if you had 14.5% if it is worth paying a 3.1% premium on top because you don't have 20%. Ultimately you will pay 17.6%, just 2.4% off the 20% payment. Or if you have 17.2% down payment they will charge a 2.8% premium for insurance, for a total of 20% of the purchase price.
Of course it takes time to save the extra 5.5% or 2.8% whereas the CMHC fee rolls into the mortgage payment right away, so this credit brings forward your home ownership experience at the expense of a larger mortgage. Some see the CMHC premium as a monthly payment, but the reality is it is a fee that you have borrowed to pay for. You can pay the CMHC fee up front if you desire, but of course to most buyers that would possibly defeat the purpose.
According to CMHC, premiums in Manitoba, Ontario and Quebec are subject to provincial sales tax which cannot roll into the mortgage. This can amount to hundreds or even thousands of dollars that must be paid at time of purchase.
For official rates, updates or specific information, please refer to Canada Mortgage and Housing Corporation.