Hi all, and welcome back to the Mortgage Studio blog! I’m Michele Ellis, a mortgage broker in Squamish, B.C., and my goal is to spread awareness of the mortgage industry and changes therein to my fellow Canadians. This is only my second post of the year, but there’s already a lot going on! The big news this week is that Canada Mortgage and Housing Corporation (CMHC), the most experienced mortgage loan insurer in the country, has announced that it’s “increasing its homeowner mortgage loan insurance premiums effective March 17, 2017.”
That sounds daunting, so let me break it down a little bit. In Canada, homeowners who put down less than 20% of the purchase price of their home are required by law to pay mortgage insurance (which protects the lender in case the homeowner defaults on the loan). The insurance premiums vary depending on the size of the down payment and the price of a home – this is called the loan-to-value ratio – and currently the standard premium ranges from 0.6% of the mortgage value (when the loan-to-value ratio is low) to 3.85% of the mortgage value (when the loan-to-value ratio is abnormally high). Starting March 17th of this year, the new range of those values will shift so that almost all premiums will be higher than they are today, with 4.5% of the mortgage value being the new upper limit.
So what does that mean for a mortgage insured under the new rules? According to CMHC (via CBC), it means very little: “It expects the changes announced Tuesday to work out to an extra $5 a month, on average, per borrower.” That doesn’t sound like much, but if you multiply it by the lifetime of a mortgage – it means an extra couple thousand dollars.
But here’s the good news: “Anyone who already has a mortgage or has applied for one will be grandfathered into the old rates.” That means that if you have a mortgage now, or apply for one before March 17th, you avoid this insurance premium increase entirely. If you’ve been thinking about it at all, or if you have any questions about how these new rules affect you specifically, I urge you to give me a call at 604.892.4647. As a mortgage broker with years of experience dealing with shifting economic climates and constantly changing rules, I know exactly how to navigate the landscape to get YOU your perfect mortgage. It doesn’t cost you anything at all to ask for my advice, but it could save you thousands of dollars in the long run if you do. I get paid by lenders directly, so my only interest is finding you the right fit – and I guarantee I will.
On that note, have an excellent weekend and a wonderful rest of the month! I hope to hear from a few of you before March 17th!
Michele Ellis – Senior Mortgage Broker, The Mortgage Studio