Canada’s two biggest mortgage insurers both raised their premiums by 15% this week, bringing changes to the mortgage landscape for many homebuyers. Homebuyers with less than a 10% down payment will be facing a 15% premium hike, effective June 1st, for both Genworth Financial and CMHC.
The changes will not affect those who currently hold mortgage insurance through either Genworth or CMHC, and both organizations say these changes promote the long-term health of Canada’s housing system. Overall, these changes won’t make a significant impact to homebuyers when you crunch the numbers.
To illustrate, a typical first-time homebuyer taking out a 95 per cent loan-to-value mortgage of $300 000 will see an increase of approximately $6 in their monthly mortgage payment (based on a 2.79 per cent interest rate and 25-year amortization period). [Genworth Financial]
In Canada, it’s law that anyone purchasing a home with less than 20% down payment must purchase mortgage insurance. The reasoning for this is that those who have 20% or more are considered to be low-risk mortgage borrowers, and therefore insurance is not required.
Whether you have less than a 20% down payment or not, Calgary’s real estate market is really favouring buyers at this point, and which mortgages still historically low, it’s a great time to buy a home. Our housing market is cyclical, so it makes sense to buy when it’s affordable and reap the rewards of a good investment as home values rise again.
If you have any questions about the most recent mortage insurance changes to Genworth Financial or CMHC, or just have some questions regarding the real estate market in Calgary, please feel free to contact me. Alternatively, you can always reach me on Twitter.
