Recent Insurance Premium Increase Breakdown

Katherine Martin • April 24, 2015

Insurance Premium Increase

On April 2nd 2015 CMHC announced that effective June 1, 2015, the mortgage loan insurance premiums for homebuyers with less than a 10% down payment will increase by approximately 15%.

Canadian financial expert Preet Banerjee recorded a short 2 minute video that summarizes how the increase could impact you. Watch the video and follow along with the transcript if you like. From there, let’s discuss how breaking down the increase to a simple monthly payment doesn’t account for the true cost of the increase.

Transcript

How might the recently announced increase to CMHC premiums affect you? If you’re buying a home with less than 10% down, you might be paying more for your mortgage loan insurance as of June 1st 2015. CMHC insurance is mortgage default insurance that many homebuyers require in order to get a mortgage from lenders.

The premium for this insurance usually gets added to your mortgage balance. For down payments between 5% and 9.99% the premium up until June 1st 2015 is 3.15%, but on June 1st 2015 the premium increases to 3.60%.

To see how this change might affect your bottom line let’s look at an example:

Suppose you want to buy a $400k home, a 5% down payment would be $20k. That means you would initially be looking at a $380k mortgage. The old premium 3.15% equals $11,97o which would increase your initial mortgage balance to $391,970. The new premium of 3.6% equals $13,680, which would increase your initial mortgage balance to $393,680. That’s a difference of $1710. Assuming a 2.5% 5 yr fixed rate mortgage with an amortization of 25 years, that means that under the old premium your mortgage payments would initially be $1,755.89. With the increased premium your mortgage payments would initially be $1763.55.

That works out to an increase of $7.66 per month.

So is CMHC selling me a used car?

When CMHC initially made the announcement, they included the following in their release: “For the average Canadian homebuyer who has less than a 10% down payment, the higher premium will result in an increase of approximately $5 to their monthly mortgage payment. This is not expected to have a material impact on housing markets.”

It kinda sounds like CMHC is framing this increase as one that won’t have an impact to the average Canadian home buyer. Isn’t this a lot like a low-brow used car sales tactic of trying to sell a car without acknowledging the price or interest rate but rather simply focusing on the affordability of the monthly payments?

Let’s use Preet’s example. Although $7.66 a month increase in a mortgage payment doesn’t sound like a huge deal… there are some flaws in the assumptions. To break down the increase into a monthly cost in order to minimize it’s impact makes the assumption that you are going to take the full payment schedule to payoff your mortgage. That is 25 years. What is the likely hood that you are now purchasing the home you are going to be living in for the next 25 years? As most Canadians either move or change their mortgage financing every 3 years… not likely.

If you go back to the transcript or watch the video, you will see that:

The actual increase in premium isn’t just $7.66 a month, it’s the total of $1710.

This is because the $1710 is capitalized into your mortgage, or added to your mortgage balance… so when you pay out your mortgage you will be paying the FULL amount at that time. There is no escaping it. Regardless of how you break it down, if you refinance your mortgage or if you sell your property and buy a new place, you will eventually pay the full $1710. So to present the increase as insignificant seems rather insincere.

Keep in mind that in this example the actual overall cost of insurance is actually $13,680 not just the increase of $1710.

Takeaway

Although it’s true, the immediate impact of the increase might only be a few dollars added to your monthly payment, if you are purchasing a property with 5% down, you should be aware of the greater impact the entire insurance premium can have on you down the road.

After you apply your downpayment of 5%, and add back the insurance premium of 3.6%, you actually only have 1.4% equity left in your property. If you are looking to sell your place in the short term, with typical real estate commissions at 5%, you would already be 3.6% underwater from day 1 which could significantly limit your options.

When buying a property with 5% down, it is imperative that you have a plan in place and that you understand how the decisions you make today can impact your future. I would love to help you work on a plan.

Katherine Martin


Origin Mortgages

Phone: 1-604-454-0843
Email: kmartin@planmymortgage.ca
Fax: 1-604-454-0842


RECENT POSTS

Bank of Canada Rate Announcement Dec 10th, 2025

By Katherine Martin • December 10, 2025
Bank of Canada maintains policy rate at 2.1/4%. FOR IMMEDIATE RELEASE Media Relations Ottawa, Ontario December 10, 2025 The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. Major economies around the world continue to show resilience to US trade protectionism, but uncertainty is still high. In the United States, economic growth is being supported by strong consumption and a surge in AI investment. The US government shutdown caused volatility in quarterly growth and delayed the release of some key economic data. Tariffs are causing some upward pressure on US inflation. In the euro area, economic growth has been stronger than expected, with the services sector showing particular resilience. In China, soft domestic demand, including more weakness in the housing market, is weighing on growth. Global financial conditions, oil prices, and the Canadian dollar are all roughly unchanged since the Bank’s October Monetary Policy Report (MPR). Canada’s economy grew by a surprisingly strong 2.6% in the third quarter, even as final domestic demand was flat. The increase in GDP largely reflected volatility in trade. The Bank expects final domestic demand will grow in the fourth quarter, but with an anticipated decline in net exports, GDP will likely be weak. Growth is forecast to pick up in 2026, although uncertainty remains high and large swings in trade may continue to cause quarterly volatility. Canada’s labour market is showing some signs of improvement. Employment has shown solid gains in the past three months and the unemployment rate declined to 6.5% in November. Nevertheless, job markets in trade-sensitive sectors remain weak and economy-wide hiring intentions continue to be subdued. CPI inflation slowed to 2.2% in October, as gasoline prices fell and food prices rose more slowly. CPI inflation has been close to the 2% target for more than a year, while measures of core inflation remain in the range of 2½% to 3%. The Bank assesses that underlying inflation is still around 2½%. In the near term, CPI inflation is likely to be higher due to the effects of last year’s GST/HST holiday on the prices of some goods and services. Looking through this choppiness, the Bank expects ongoing economic slack to roughly offset cost pressures associated with the reconfiguration of trade, keeping CPI inflation close to the 2% target. If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment. Uncertainty remains elevated. If the outlook changes, we are prepared to respond. The Bank is focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. Information note The next scheduled date for announcing the overnight rate target is January 28, 2026. The Bank’s next MPR will be released at the same time.

Smart Steps to Get Your Home Market-Ready

By Katherine Martin • December 3, 2025
Thinking About Selling Your Home? Start With These 3 Key Questions Selling your home is a major move—emotionally, financially, and logistically. Whether you're upsizing, downsizing, relocating, or just ready for a change, there are a few essential questions you should have answers to before you list that "For Sale" sign. 1. How Will I Get My Home Sale-Ready? Before your property hits the market, you’ll want to make sure it puts its best foot forward. That starts with understanding its current market value—and ends with a plan to maximize its appeal. A real estate professional can walk you through what similar homes in your area have sold for and help tailor a prep plan that aligns with current market conditions. Here are some things you might want to consider: Decluttering and removing personal items Minor touch-ups or repairs Fresh paint inside (and maybe outside too) Updated lighting or fixtures Professional staging Landscaping or exterior cleanup High-quality photos and possibly a virtual tour These aren’t must-dos, but smart investments here can often translate to a higher sale price and faster sale. 2. What Will It Actually Cost to Sell? It’s easy to look at the selling price and subtract your mortgage balance—but the real math is more nuanced. Here's a breakdown of the typical costs involved in selling a home: Real estate agent commissions (plus GST/HST) Legal fees Mortgage discharge fees (and possibly a penalty) Utility and property tax adjustments Moving expenses and/or storage costs That mortgage penalty can be especially tricky—it can sometimes be thousands of dollars, depending on your lender and how much time is left in your term. Not sure what it might cost you? I can help you estimate it. 3. What’s My Plan After the Sale? Knowing your next step is just as important as selling your current home. If you're buying again, don’t assume you’ll automatically qualify for a new mortgage just because you’ve had one before. Lending rules change, and so might your financial situation. Before you sell, talk to a mortgage professional to find out what you’re pre-approved for and what options are available. If you're planning to rent or relocate temporarily, think about timelines, storage, and transition costs. Clarity and preparation go a long way. The best way to reduce stress and make confident decisions is to work with professionals you trust—and ask all the questions you need. If you’re thinking about selling and want help mapping out your next steps, I’d be happy to chat anytime. Let’s make a smart plan, together.
© 2025 

Katherine Martin. All Rights Reserved.