Changes to Mortgage Default Premiums on March 17, 2017
Mortgage insurance Mortgage default insurance, commonly referred to as CMHC insurance, protects the lender in the case the borrower defaults on the mortgage.
Mortgage default insurance is required on all mortgages with down payments of less than 20%, which are known as high ratio mortgages. This premium is added onto your mortgage balance and factored into your monthly principle and interest payment.
How Much more will I be paying for my Mortgage Default Premium?
Say you are purchasing a $300,000 home with 5% down ($15,000), 5 yr fixed rate is 2.69%.
Before March 17, 2017:
Premium: 3.60% x ($300,000 – $15,000) = $10,260
Total Mortgage equals: $300,000 – $15,000 + $10,260 = $295,260
Monthly payment: $1350.77
After March 17, 2017:
Premium: 4.00% x ($300,000 – $15,000) = $11,400
Total Mortgage equals: $300,000 – $15,000 + $11,400 = $296,400
Monthly payment: $1355.98
Yes it is only $5.21/month difference, however you will be essentially starting with 1% equity in your home compared to 1.4%; difference of $1140.
If you are looking to buy and want to save on the premium, have an offer & a mortgage approval on a home prior to March 17, 2017.
For more information, contact Jacqueline Jeffries Mortgage Broker with Quantus Mortgage Solutions at 780.220.5968 or visit jacquelinemortgages.com.