It was announced this morning Jan 17th, that the countries national mortgage insurer will be once again raising insuring premiums on March 17th, 2017. (We expect Canada's 2 other mortgage insurers follow suit shortly). While the CMHC passes it of as only about $5 per month, in the case of an average home purchase on the North East Avalon a $300,000 home this will add another $1200 to their bottom line up from an already $10,260 to $11,400 for a purchaser with a 5% down payment.
The biggest losers here are the most vulnerable, as anyone that has been "gifted" their down payment from a family member will see the biggest jump which would increase their insuring premium by almost $2000. From $10,972 to $12,825.
Let me simplify the math for you:
$300,000 purchase
-$15,000 (5% down payment)
= $285,000 balance
+$12,825 (insuring premium)
$297,825 is the amount you'll be financing
So, at least in this example, less than .50% of what you're putting down actually goes toward the purchase of your home. Any increase here means you end up with less equity in your home at the time of purchase AND in the future.
CMHC can read from the press release, but these increases are not insignificant to the average home buyer and can hardly be justified based on the current rate of arrears/foreclosures in Canada that tend to hover at less than 1/3 of 1% (.30%).
As a reference during the housing meltdown in the United States in 2008-2009 their arrears rate were in the 8-9% range.
This is just one example, but if you have questions or wish to discuss how this will impact your bottom line, feel free to send any inquiries along to mark@normanlane.ca to run your specific numbers.
