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February Preferred Client Update

Blog by Kim Twohey | February 2nd, 2017


CMHC to Hike Mortgage Insurance Premiums as of March 17

The Canada Mortgage and Housing Corporation will charge borrowers a few dollars more every month to insure their mortgages, starting in March.

By law, anyone putting down less than 20% of the purchase price of a home in Canada must pay mortgage insurance, even though the homeowners themselves don’t benefit from that coverage. Rather, it’s a fee borrowers pay so if they default on loans, their lenders aren’t on the hook. Instead, an insurance payout would cover any defaulted loans.

Premiums are calculated based on the amount borrowers are getting versus the size of the down payments.

Typically, CMHC fees are as little as 0.6% of each loan’s value. But on smaller down payments and larger loans, the fees can mount to 3.6%—more than six times as much as the lowest rate.

Under current rules, the CMHC charges 3.6% to insure that mortgage, or $24,567 over the life of the loan.

Under new rules starting March 17, the CMHC will charge 4% of that loan’s value to insure the loan. That pushes the premium to $27,297, an increase of $2,730 or $12 a month.

Different borrowers will pay different amounts depending on how much they are borrowing, and how much equity they have.


Top Renovation to Increase Property Value

Kitchens are the single most important room in the home relating to valuation. As such, it is crucial that you invest in having a modern, fresh and desirable kitchen. Modern cabinetry, under cabinet lighting and new appliances will all significantly increase the value of your home on the market. To save on cost without compromising construction and desirability, look at options like Ikea cabinets as opposed to custom cabinetry.

The Appraisal Institute of Canada says renovations to the bathroom and kitchen offer the best value, with a recovery rate of 75%—100% of the amount spent. The recovery rate is the likely increase a renovation will have to a home’s resale value. So, a $5,000 renovation that increases a home’s value by $3,500 has a recovery rate of 70%.