The Canadian government has found another way to grab more money from Canadians. Paying CMHC fees is unavoidable, if you purchase a home with less than 20% down. The fee structure has been based on a sliding scale, relative to the overall value of the home you are purchasing. As of May 1, 2014 there will be a new fee structure in place to grab just a bit more, they describe it as $5 a month. I’m sure its way more than that! It is a 15% increase on the people least able to pay it, the people with barely enough money to purchase a home. These people are being hit up for more money! If they kept their mortgage for 25-years, it might work out to $5 a day, but the premium is paid in full on day one and there is no rebate of a portion of that if you sell your home earlier.
CMHC is an arms-length agency of the Federal Government. The mortgage insurance you purchase is not really for your benefit. It is purchased to insure the bank or the lender. Should you fail to pay your mortgage and the bank is unable to collect enough money from you and from the value of the home, they have the opportunity to turn to CMHC to recover their losses. The fee is a one-time payment at the time a new high ratio mortgage is being entered into.
So this doesn’t impact any existing homeowners, if you aren’t making moving or making any adjustments to your mortgage. It also doesn’t impact anyone who will be buying a home and completing the sale prior to May 1st of this year. So, I am predicting a mini boom in Toronto real estate, as potential home buyers rush out to beat this deadline. I’d even suggest a closing date of at least a week prior to that date, to avoid any last moment closing delays. Wouldn’t it be terrible to miss this deadline by just one or two days, because of a problem at closing.
Some banks and alternative mortgage lenders have the opportunity to obtain similar coverage from two other competitor firms Canada Guaranty and Genworth. It would be reasonable to expect these firms to follow suit and match the revised CMHC fees. For competitive purposes, delaying that increase by even a few additional weeks could be an excellent strategic move.
If you’ve been considering making a home purchase and you’d like to beat this deadline, let me know! I’m here to help!
Find the new CMHC fee schedule here