Abbotsford Mortgage Clients and Abbotsford Realtors alike heard rumors including increasing minimum down payment to 10% down instead of 5% or that conventional mortgages would start at 35% down payment instead of current 25% down payment to avoid paying cmhc insurance all together. Mortgage Brokers in Abbotsford, Chilliwack and Mission also theorized that CMHC would increase the minimum credit bureau score requirements or eliminate gifted down payments for insured home buyers.
Well neither of these came to fruition, instead CMHC anounced that they would be increasing their fees as follows:
Loan-to-Value Ratio & New Standard Premium (Current)
Standard Premium (Effective May 1st, 2014)
Up to and including 65% 0.50% 0.60%
Up to and including 75% 0.65% 0.75%
Up to and including 80% 1.00% 1.25%
Up to and including 85% 1.75% 1.80%
Up to and including 90% 2.00% 2.40%
Up to and including 95% 2.75% 3.15%
90.01% to 95% – Non-Traditional Down Payment 2.90% 3.35%
To put this in perspective, on a $100,000 purchase with 5% down you will have a one time premium increase of $379.50 and it will increase your payment $1.86.
- A premium increase of $379.50 per $100,000 of mortgage added to mortgage
- A minimal increase in your payments of $1.86 per $100,000 of mortgage per month
A 3.15% premium is not unheard of in the industry. In January of 2011 clients were able to purchase a house with 5% down with a 35 year amortization. The CMHC premium for that product was 3.15% (CMHC would use a 2.75% premium for a 25 year amortization but then increase it .20% for every 5 years added onto the amortization). January of 2011 the 35 year amortization was reduced to a max of 30 years, and followed in July of 2012 further reduced from a max of 30 years to 25 years.
Why was this done?? For the six months ending June 30th 2013, CMHC net income was $824,000,000! Since CMHC’s profit ends up in the governments coffers this increase will effectively end up as additional income to the government. So in the end this is just another back end tax done by the government of Canada.
But what most people we are talking to ask is, “Will this affect the local Real Estate market?” – The short answer on that is No.