Yikes. Not much of a break for home buyers with not much to put down on their new home here. Actually quite the opposite.
Come June 1 there will be a 15% increase for those with less than 10% (financial institutions generally require mortgage loan insurance for buyers making a down payment of less than 20 per cent).
CMHS (the Canada Mortgage and Housing Corporation) is the country’s largest insurer of home mortgages and says the increase follows an annual review of its insurance products and capital requirements. The changes do not apply to mortgages currently insured by CMHC.
The good news is that the extra cost should not hurt too much. For example, for the homebuyer who has less than a 10 per cent down payment and borrows $250,000, the higher premium will result in an increase of about $5.20 to the monthly mortgage payment.
Still, owning a home can be expensive and this rate hike hits those who probably have the least to spend.
It’s also interesting to note that although the insurance protects the lenders from defaults, the costs are still usually taken on by the borrowers.
When looking at the housing market in general, Ottawa has made a number of changes to mortgage rules during the housing boom to cool the market and limit its exposure, one being lowering amortization lengths from 40 years to 25 years.
What do you think? Will these new rules affect you in purchasing a new home?
SOURCE: CMHC
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