Small changes to CHMC’s mortgage loan insurance premiums took effect on May 1, 2014. What’s in it for future condo buyers?
Anyone looking to buy a house should know about the services offered by the Canada Housing and Mortgage Corporation (CHMC). For over sixty years, this national housing agency has worked to protect lenders against mortgage default and to encourage access to housing to all types of buyers. Notably, it is through the CHMC that Canadians with 5% down payment capacity can benefit from the same interest rates than buyers able to provide 20% or more down payments.
How does it work? Buyers with a down payment capacity under 20% have to subscribe to a mortgage loan insurance provided by the CHMC. The price of the premium is based is mostly determined by calculating the house price/value borrowed ratio. Thus, the higher the amount of the loan, the higher the premium, up to 20% . This service plays a major role in housing accessibility in Canada.
This year, CMHC has announced new premium rates effective for mortgage loan insurance requests submitted on or after May 1, 2014. These raise apply to owner occupied, self-employed and 1-to-4 unit rental properties. CMHC has argued that this decision reflect the need to maintain a certain capital level.
According to CMHC, “for the average Canadian homebuyer requiring CMHC insured financing, the higher premium will result in an increase of approximately $5 to their monthly mortgage payment.” Indeed, in most cases, the payment of the premium is equally distributed in monthly mortgage payments. Buyers must also remember that Quebec, Manitoba and Ontario apply a sales tax on these premiums. The tax has to be paid entirely at the time of the transaction.
The bottom line still remains; CHMC services are truly beneficial for the Canadian housing market, improving its stability and accessibility.