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CMHC Insurance Rules

If you’re purchasing a home in Canada with less than a 20% down payment than like it or not you’re doing business with CMHC (Canadian Mortgage & Housing Corporation). CMHC provides mortgage loan insurance to help lenders offer mortgages at the lowest rates and enables first time buyer, who typically have less than 20% down, realize their dreams of home ownership!

On Friday February 28th our finance minister, Jim Flaherty, announced changes to mortgages insured by CMHC that will go into effect as of May 1, 2014. The media and anyone with interest in the real estate market was abuzz Friday with opinions of what the changes really mean for the housing market. Read the press release here.

Some opinions are that the real estate market will see a slow-down, buyers will be priced out of the homes they are looking to buy and it will become increasingly difficult to get the financing they need. However the press release itself specifically states, “This is not expected to have a material impact on the housing market.’ So don’t panic! 

Who this affects:

-Buyer’s who submit a new mortgage loan insurance request after May 1, 2014. (The current mortgage loan insurance premiums will apply for applications submitted to CMHC prior to May 1 , 2014, regardless of the closing date.)

-Buyer;s requiring mortgage loan insurance premiums for residential housing of 1-to-4 units including owner occupied, self-employed and 1-to-4 unit rental properties.

This does not apply to mortgages currently insured by CMHC

Let’s look away from the media hype for a moment! CMHC’s new higher insurance premiums will result in an increase of approximatly $5.00 a month to mortgage payments for every $248,000 insured. With the average Toronto home now selling for just over $500,000, that’s approximately a $10.00 increase or – one week of Starbucks coffees!

Buyer’s are more competitive than ever and we predict a rush to get their applications in before May 1, 2014. However, come May 2nd we certainly don’t see a cooling off in the real estate market over the cost of a half dozen coffee’s, do you? Comment below or contact us at 416-291-7372.

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