CMHC Raises Premium AGAIN - Target Homebuyers < 10% Down Payment

[Mortgage Made Easy]

CMHC announced that they are increasing the Premium for Homebuyers with less than 10% down payment.

Increase from 3.15% to 3.60%

The new rates go into effect June 1 and mean mortgage default payments for people with 10% down or less will increase by 15%. The premium in that category will rise to 3.6% of the value of the mortgage from 3.15% which CMHC says amounts to about $5 on a monthly mortgage.

NOTE - Currently this is only affecting Mortgages Submitted to CMHC. No word from Genworth or Canada Guaranty... yet.

Full Article - Canada Mortgage and Housing Corp takes aim at homebuyers with less than 10% down

[V]

I thought the premium was only 3.15% for 5% down. 2.4% for less than 10% down. Am I reading this table wrong?

http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_005.cfm

[Mortgage Made Easy]

Originally Posted by V

I thought the premium was only 3.15% for 5% down. 2.4% for less than 10% down. Am I reading this table wrong?

http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_005.cfm

The announcement is for a premium increase starting June 1.

The 3.15% will increase to 3.60% and the rest of the table remains the same.

[Regorium]

Originally Posted by V

I thought the premium was only 3.15% for 5% down. 2.4% for less than 10% down. Am I reading this table wrong?

http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_005.cfm

The table states that the price between 90.01% and 95% LTV value (ie. 5-9.99% down) is 3.15%. That rate is going up to 3.6%.

[Mortgage Made Easy]

If you plan to buy a home with less than 10% down and get CMHC insurance, you will pay approx. another $450 per $100,000 of mortgage.

[Mortgage Made Easy]

Genworth has also is following in CMHC's footsteps and increasing the Default Insurance Premiums as well.

Here is the announcement.

[mrkajz44]

Not that this really changes anything, but can someone explain these fees to me?

I bought a house recently and went through all of the paperwork regarding these fees. As I understand it, I pay these premiums because I cannot get 20% down. That is fine. However, my lawyer said if I default, I would still be legally liable for the mortgage amount, should the bank wish to pursue that avenue.

I get that if I default, I likely have very little in the way of other assets, but it seems like I am paying a premium (CMHC fees), but subsequently getting no protection. Is this correct?

[Mortgage Made Easy]

Originally Posted by mrkajz44

Not that this really changes anything, but can someone explain these fees to me?

I bought a house recently and went through all of the paperwork regarding these fees. As I understand it, I pay these premiums because I cannot get 20% down. That is fine. However, my lawyer said if I default, I would still be legally liable for the mortgage amount, should the bank wish to pursue that avenue.

I get that if I default, I likely have very little in the way of other assets, but it seems like I am paying a premium (CMHC fees), but subsequently getting no protection. Is this correct?

The lawyer is correct. You are liable for the mortgage even if you don't pay. Like any loan, the lender has a duty to recover the loan and if they cannot the insurance is in place for the loss.

The insurance is for the investor who has provided the funds to the lender and and then has lent to the consumer.

[mrkajz44]

Okay, I understand that I am liable for the mortgage, that makes sense. But essentially, I am paying an insurance premium to protect someone else (the investor). I know of no other insurance where I am paying a premium and then not getting any coverage in return. I think its just a backwards way to do things.

If the investor wants insurance, they should insure the mortgage themselves, not the borrower of the funds. At least, that's how I see it.

[ken0042]

I do agree to a certain extent; however keep in mind that this was brought in so that people didn't have to have a 20% down payment. Without CMHC, banks would likely not want to look at mortgages without that much down.

So the benefit you are getting is being able to buy a house with only 5% down.

If the coverage protected you in the way you are thinking, the cost would have to be considerably more; as it would be used far more frequently.

[Street Pharmacist]

Also, the coverage was designed to prevent banks from collapsing from a housing bubble.

[lorenavedon]

Originally Posted by mrkajz44

Okay, I understand that I am liable for the mortgage, that makes sense. But essentially, I am paying an insurance premium to protect someone else (the investor). I know of no other insurance where I am paying a premium and then not getting any coverage in return. I think its just a backwards way to do things.

lots of insurance works this way. Car insurance can be had with liability only for the protection of others not you. General contractors get insurance to protect those they do work for if they mess something up. Nobody is forcing you to buy a home with less than %20 down.

[Mortgage Made Easy]

REMINDER -- Mortgage Insurance Premium Rate Changes

Effective June 1, 2015 Mortgage Insurance premiums are increasing.

To be eligible for the current premium rates, all applications for mortgage insurance must be submitted to a lender prior to May 27 and May 28, 2015 (the “Cut-Off Time”). Any applications submitted after the Cut-Off Time will be subject to the new premium rates.

Questions and Answers

Purchase

1. What if a purchase and sale agreement is signed prior to June 1, 2015 and the mortgage application is submitted after the Cut-Off Time?

In this scenario, the new insurer premium rates would apply. Even though the purchase and sale agreement was signed before June 1, 2015, the mortgage insurance application was received after the Cut-Off Time, and therefore the new rates apply.

2. What if the borrower(s) have signed a purchase and sale agreement and require mortgage insurance, however, the closing date is after June 1, 2015, will the current premiums still apply?

As long as the application is received are submitted to the lender prior to the Cut-Off Time, the current premiums will still apply.

3. What if the borrower’s mortgage pre-approval from a lender is dated before June 1, 2015, will it still be eligible for the current premium rates if it doesn’t have a signed agreement of purchase until after the Cut-Off Time?

All applications for mortgage insurance must be submitted to the lender prior to Cut-Off Time with a binding purchase and sale agreement in place to be eligible for current premium rates. Pre-approvals which do not go firm prior to the Cut-Off Time will be re-underwritten at the new premium rates. This may effect loan amounts and/or approvals based on the higher premium amounts added to the debt service calculations.

Changes after the Cut-Off Time

4. If an application was submitted to the lender for mortgage insurance prior to the Cut-Off Time, and the application then gets resubmitted with changes or updates after the Cut-Off Time, will the application continue to be eligible for the current premiums?

As long as the original application was submitted to the lender prior to the Cut-Off Time, current premiums will still apply.