Owning a Home in Ottawa just got more expensive
by Dave Williams

Starting May 1st, 2014 owning a home is going to cost you a little bit more if you are not putting 20% down. This will apply to any mortgage loan insurance application submitted to CMHC on or after May 1st, but not any they approve before April 30th.

Understating mortgage loan insurance. For brevity I’ll just focus on primary residences as the fees are calculated differently for income properties. When you are requesting a mortgage for more that 80% of the homes value or beyond a 25 year amortization the lenders are required to obtain mortgage loan insurance. CMHC is the largest provider of this service in Canada, and a government owned entity. Genworth Financial and Canada Guarantee have not yet followed suit but are expected to in the near future.

Mortgage loan insurance can either be paid in a lump sum or rolled into the mortgage principal and paid thought the life time of the mortgage. It is calculated on the total amount of the mortgage as show here:

eg. So a $350,000 home purchase, with 5% down ($17,500) would require a mortgage of $332,500.

Today it would require an insurance premium of $9143.75 after May 1st $10473.75 a $1,330 difference or a $6.32 increase to monthly mortgage payments if included in the mortgage. (Calculated 3.04% over 25yrs; as a side note it would cost $1,896.45 to pay off that extra $1,330 over the course of the mortgage.)

So if you’re trying to beat the clock, we checked with our mortgage broker:

@HomeTeamOttawa I would then say if the purchase is within 120 days, then April 29th-30th should be good.

— Nick Bachusky (@Bachusky) March 26, 2014

Hope this helps you understand real estate a little better.
As always if you have any real estate questions ask them below, or contact us directly at 613-788-2113.