Did you put less than a 20% down payment on your home? You aren’t the only one. It can be tough to scrape together a down payment and if it is under 20% you are obligated to have mortgage insurance.
Starting May 1st, 2014 the CMHC will increase the mortgage insurance premiums. The most affected by this are those who only have a 5% down payment.
Previously, the premiums ranged between 0.5 to 2.75% and with this increase the range will be 0.6 to 3.15% depending on how much of a risky borrower you are.
For new mortgages on an average starter home that costs $250,000 with 5% down ($12,500) your premium will go from 2.75% to 3.15%. Your borrowing cost will be $237,500 and what would have cost you $6,531 will now cost you $7,481.
That is an increase of $950.25 a year which averages to an increase of about $5 per month (from $75 to $80 per month).
These are not huge changes to monthly payments but they will add up over time. It may deter first time home buyers or at least encourage them to wait until they have a higher down payment. For more of a break down on how this may affect you as a borrower, check out CMHC’s website.
Looking for some mortgage advice? Give Holly Martin at Anthem Mortgage Group a call at 705.795.6678. A partner you can trust, with the experience that you need. Learn more about mortgages on the Anthem Mortgage Website.