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Mortgage Insurance Premiums Increased CMHC

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CMHC will increase its mortgage loan insurance premiums for homeowner and 1 – 4 unit rental properties effective May 1, 2014.

Increase applies to mortgage loan insurance premiums for owner occupied, self-employed and 1-to-4 unit rental properties, including low-ratio refinance premiums.

For the average Canadian homebuyer requiring CMHC insured financing, the higher premium will result in an increase of approximately $5 to their monthly mortgage payment. This is not expected to have a material impact on the housing market.

Effective May 1st, CMHC Purchase (owner occupied 1 – 4 unit) mortgage insurance premiums will increase by approximately 15%, on average, for all loan-to-value ranges.

Loan-to-Value Ratio 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%

 

Backgrounder

  • Mortgage loan insurance helps protect lenders against mortgage default and enables consumers to purchase homes with a minimum down payment of 5% with interest rates comparable to those with a 20% down payment. Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price.
  • CMHC mortgage loan insurance premium is calculated as a percentage of the loan based on the loan-to-value ratio. The premium can be paid in a single lump sum but more frequently is added to the mortgage principal and amortized over the life of the mortgage as part of regular mortgage payments.
  • CMHC reviews its premiums on an annual basis and has adjusted them several times since being commercialized in 1998. Adjustments have included both increases and decreases to the premiums.
  • CMHC’s new premium rates will be effective for new mortgage loan insurance requests submitted on or 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. As is normal practice, complete borrower and property details must be submitted to CMHC when requesting mortgage loan insurance.
  • The increase applies to mortgage loan insurance premiums for residential housing of 1-to-4 units. This includes owner occupied, self-employed and 1-to-4 unit rental properties, including low-ratio refinance premiums.
  • In 2013, the average CMHC insured loan at 95% loan-to-value was $248,000. Using these figures, the higher premium will result in an increase of approximately $5 to the monthly mortgage payment for the average Canadian homebuyer. This is not expected to have a material impact on the housing market.
95% Loan-to-Value
Loan Amount $150,000 $250,000 $350,000 $450,000
Current Premium $4,125 $6,875 $9,625 $12,375
New Premium $4,725 $7,875 $11,025 $14,175
Additional Premium $600 $1,000 $1,400 $1,800
Increase to Monthly Mortgage Payment $3.00 $4.98 $6.99 $8.98

Based on a 5 year term @ 3.49% and a 25 year amortization

*Premiums in Manitoba, Ontario and Quebec are subject to provincial sales tax — the sales tax cannot be added to the loan amount.

85% Loan-to-Value
Loan Amount $150,000 $250,000 $350,000 $450,000
Current Premium $2,625 $4,375 $6,125 $7,875
New Premium $2,700 $4,500 $6,300 $8,100
Additional Premium $75 $125 $175 $225
Increase to Monthly Mortgage Payment $0.37 $0.62 $0.87 $1.12

Based on a 5 year term @ 3.49% and a 25 year amortization

*Premiums in Manitoba, Ontario and Quebec are subject to provincial sales tax — the sales tax cannot be added to the loan amount.

For more information visit https://www.cmhc.ca/en/hoficlincl/moloin/moloin-013.cfm

Stop Dating Your Debt & Commit Already! Are Your Christmas Bills Still Around at Valentines Day?

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Debts still Piled up from Christmas Holiday? images (6)The thrill of the Christmas Holiday Season is well past. Are you still dating the debt you built up over the holiday season due to shopping, eating out, or maybe even a vacation. Its time to get serious about reducing or the elimination of your debt and here are some tips how:

 

 

Five Simple Steps To Pay Off or Eliminate Your Debt

  1. Keep it simple, Target one card first: Try making the minimum payment on all your cards but pay as much as you can to the card with the highest interest rate. Paying one card off fast can give you self satisfaction and keep you motivated to become debt free faster.
  2. Propose to Creditors to lower the interest rate on your card: In some cases creditors are willing to lower your rate of interest on your card. Even a percent or two can save you hundreds of dollars on annual bases.
  3. Transfer your balance to a lower rate card (cautiously): Transferring higher interest rated debt to a card or LOC with a lower rate and significantly reduce the interest you pay on debt. But be careful: You should transfer a balance only if you’re committed to paying off the debt within an introductory low-interest-rate window (which typically lasts 12 to 18 months after the first billing cycle closes) Be sure to commit to the relationship of debt reduction or debt repair.
  4. Debt Consolidation Loan: Using a secured debt consolidation loan or unsecured through your bank can consolidate into a lower payment. This can allow you to focus on paying off your debt gradually over a year or two.
  5. Home Equity Loan: If your debt is affecting your cash flow and you are looking for payment relief a home equity loan maybe an option for you. There are many different equity loan products out there at great home equity loan rates. Since these loans are based on equity it doesn’t matter if you have bad credit or low income. There is a product out there for most home owners. Call Today to Learn More!

Jeff DiLorenzo  The Mortgage Group Canada Inc. 1-877-744-3436