mortgage default insurance rates rising
Lets have a look.
Effective March 17, 2017 mortgage default insurance rates are rising. This is the third increase in as many years.
Anyone looking to secure a mortgage with less than 20% down payment will be impacted by the mortgage default insurance rates rising. The new premiums are being implemented in response to the Office Of The Superintendent’s (OSFI) implementation of new capital requirements introduced at the beginning of this year. The requirement for lenders and banks to hold more capital to continue operating, thereby increasing the probability that mortgage insurance companies can absorb and default losses.
Lets look at Some Numbers
After March 17, if you are looking at a purchase price of $400,000 with 5% ($20,000) down payment your mortgage default insurance premium would be $15,200 compared to $13,680 prior to the change.
Don’t Be Discouraged
Granted, mortgage default insurance is here to stay, as these premiums help lenders cover related expenses to default, protecting the lending industry from rising household debt, but, on a positive note, we still have the opportunity to purchase a property with 5% down payment!
At A Glance
Premiums are calculated based on the amount of mortgage required, the amount of your down payment, debt servicing ratios along with the new stricter income testing change that we saw come into effect in October last year.
CMHC paints a very clear picture of premiums, payments and what the increase looks like in their January 17, 2017 news release.
As mortgage default insurance is an essential part of buying a home, particularly for buyers with less than 20% down, it is important you understand the premiums and how your mortgage payment is impacted. Have any lingering questions?
We’re happy to help anytime so please give us a call.
