Why mortgage before March 17?

If you’re in the market for an insured mortgage, then you might want to get that mortgage before March 17.

Canada Mortgage and Housing Corporation (CMHC) is raising premiums for insuring mortgages on Canadian homes for the third time in three years. Canadian homebuyers are required to have mortgage insurance if they have less than a 20 per cent downpayment. The insurance provides protection for the lender in the case of a default.

How will it hit your wallet? The increase is not too significant for those making the minimum downpayment required. A homebuyer with a $250,000 mortgage and a 5 per cent downpayment will pay about $5 per month more in insurance premiums. I can calculate exactly how much the increase will mean to you if you get your mortgage approval on or after March 17.

The increases are actually more substantial for larger downpayments of 15 per cent or more. Those with 20 per cent or more downpayment aren’t required to have mortgage insurance, although it’s used by lenders that securitize their mortgages. As a result, any increased cost will likely be passed on to customers through higher rates.

Premiums are also increasing for “non-traditional” insured mortgages i.e. home buyers with borrowed downpayments, a type of mortgage downpayment that could grow in popularity as homebuyers strive to gain entry in the housing market.

The premium change will come into effect on March 17. Homebuyers will be able to access the current lower rates if they have bought a home and are approved before the March 17 deadline, even if they have a later closing date.

If you are looking to buy, get in touch today!

If you’re buying your first home, the Federal Home Buyers’ Program (HBP) and a tax refund can boost the funds you have available. Make as big an RRSP contribution as you can before the March 1 contribution deadline for the 2016 tax year – up to your contribution limit or the maximum $25,000 per person. Use your downpayment savings if you can because you want as big a 2016 refund as possible. After 90 days you can redeem your contribution under the HBP program, giving you your original downpayment funds back PLUS a nice fat tax refund. You’ll need to pay the withdrawn funds back on a repayment plan, but this strategy can make a substantial difference in the affordability of home ownership!