CMHC announced on Thursday, April 2nd that they will be increasing mortgage insurance premiums for homebuyers that have 5%-9.99% of the purchase price as a downpayment by 15%. For homebuyers with 5% down – the premium on the mortgage will increase from 3.15% to 3.60%. For homebuyers that have 5%-9.99% as a downpayment from non-traditional sources* they will have an increase from 3.35% to 3.85%.
What does this mean for you if you fall within this tier of downpayment and source of downpayment? The impact is very nominal as is seen in the following example:
Based on a purchase price of $300,000, 5 year fixed rate mortgage of 2.69% with a 25 year amortization.
5% downpayment from traditional sources:
- $1,496.25 increase in CMHC mortgage insurance premium
- $6.84 increase in monthly payment (principal and interest)
- $185.75 increase in total interest costs over the 5 year term mortgage (assuming no prepayments are made)
5%-9.99% downpayment from non-traditional sources* (in this case we are using worse case scenario of a 5% downpayment):
- $1,662.50 increase in CMHC mortgage insurance premium
- $7.61 increase in monthly payment (principal and interest)
- $206.29 increase in total interest cost over the 5 year term of the mortgage (assuming no prepayments are made)
As you can see, there is not that much of an increase however, we understand that with first time homebuyers most often, every dollar counts. Whether you are a first time homebuyer or not, if you are looking at saving on these premiums we would suggest that you purchase and have an approval prior to June 1st, 2015 to lock in the current premium.
Here is the link to the news release from CMHC.
Should you have any questions or concerns, please reach out – we are here to help.
* non-traditional sources for downpayment include any source which is arms length and not tied to the purchase or sale of the property such as: borrowed funds, gifts, 100% sweat equity, cash back incentives from lenders
Kim Gibbons, Your “Mortgage Superhero ®”
Mortgage Broker
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416-400-8107
www.mortgagesuperhero.com
