CMHC Insurance Premiums & Recent Changes to LTT Rebate

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If you are hoping to enter the scorching Real Estate market this year, I have some valuable news to share – both good and bad.

Let’s start with the bad. Canadas federal housing agency has announced that it will be raising the cost of mortgage loan insurance for homebuyers as of March 17, 2017. What this means in layman’s terms is that you can expect to pay an extra $20 per month on your mortgage of $650,000 with a 10% down payment. The reason behind this increase is that due to new regulatory requirements CMHC is required to hold more capital to offset risk. Despite the perceived unwelcome reception from first-time buyers, this move attempts to cool off the housing market and bring some stability to what seems like an unstoppable Real Estate locomotive.

Can this premium be avoided? Absolutely, come up with a 20% or more down payment and this mortgage insurance premium will not apply.

For the geeks, below is a chart showing exactly what the percentage of the increase is compared to todays (current) premiums.

Loan-to-Value RatioStandard Premium (Current)Standard Premium (Effective March 17, 2017)
Up to and including 65%0.60%0.60%
Up to and including 75%0.75%1.70%
Up to and including 80%1.25%2.40%
Up to and including 85%1.80%2.80%
Up to and including 90%2.40%3.10%
Up to and including 95%3.60%4.00%
90.01% to 95% Non-Traditional Down Payment3.85%4.50%

 

In the second portion of the write-up, let’s discuss the good!

As of January 1st, 2017 the Provincial Land Transfer Tax rebate for First-time buyers has doubled from $2,000 to $4,000. An extra $2,000 in the pocket of a first-time buyer may not seem like much, but every bit counts when purchasing a home. Now lets hope the city of Toronto follows suit and improves on the current rebate of $3,725. Given the current average price for all Toronto properties sitting at $729,922 this would not be an unreasonable ask!