OTTAWA – Canada Mortgage and Housing Corp. is raising the cost of mortgage loan insurance for new homebuyers effective March 17.
The Crown corporation estimates the increases will add about $5 to a monthly mortgage payment for its average homebuyer.
“We do not expect the higher premiums to have a significant impact on the ability of Canadians to buy a home,” Steven Mennill, CMHC’s senior vice-president of insurance, said in a statement.
CMHC says the changes reflect new regulatory requirements that came into effect on Jan. 1 that require mortgage insurers to hold additional capital.
The premiums are calculated based on the loan-to-value ratio of the mortgage being insured. The size of the increase in rates depends on that ratio.
For instance, new homeowners who make a down payment between five to 9.99 per cent can expect an increase of $6.59 to their monthly mortgage if their loan is $350,000.
For the same loan amount, those with a 10 to 14.99 per cent down payment face an increase of $11.52 a month, while those with a down payment between 15 to 19.99 per cent will pay $16.46 more a month.
The corporation says the average CMHC-insured loan was approximately $245,000.
Lenders typically require mortgage loan insurance when a homebuyer makes a down payment of less than 20 per cent. The cost can be paid in a single lump sum, but CMHC says the amount is often added to the mortgage principal and repaid over the life of the loan.