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

First-Time Homebuyer? A New GST Rebate Could Put Thousands Back in Your Pocket

By Katherine Martin • June 20, 2025
If you’re a first-time homebuyer eyeing a new build or major renovation, there's encouraging news that could make homeownership significantly more affordable. The federal government has proposed a new GST rebate aimed at easing the financial burden for Canadians entering the housing market. While still awaiting parliamentary approval, the proposed legislation offers the potential for thousands in savings —and could be a game-changer for buyers trying to break into today’s high-cost housing landscape. What’s Being Proposed? Under the new legislation, eligible first-time homebuyers would receive: A full GST rebate on homes priced up to $1 million A partial GST rebate on homes between $1 million and $1.5 million This could mean up to $50,000 in tax savings on a qualifying home—a major boost for anyone working hard to save for a down payment or meet mortgage qualification requirements. Why This Matters With interest rates still elevated and home prices holding steady in many regions, affordability remains a challenge. This rebate could offer meaningful relief in several ways: Lower Upfront Costs: Removing GST from the purchase price reduces the total amount of money buyers need to save before closing. Smaller Monthly Payments: A lower purchase price leads to a smaller mortgage, which translates to more manageable monthly payments. Improved Mortgage Qualification: With a reduced purchase amount, buyers may find it easier to meet lender criteria. According to recent estimates, a homebuyer purchasing a $1 million new home could see monthly mortgage payments drop by around $240 —money that could go toward savings, home improvements, or simply everyday expenses. Helping Families Help Each Other This proposal also offers a win for parents who are supporting their children in buying a first home. Whether through gifted down payments or co-signing, a lower purchase price and more affordable monthly costs mean that family support can go further—and set first-time buyers up for long-term success. Is This the Right Time to Buy? If you’re thinking about buying a new or substantially renovated home, this proposed rebate could dramatically improve your financial position. Now is the perfect time to explore your options and make sure your mortgage strategy is aligned with potential policy changes. 📞 Let’s connect for a free mortgage review or pre-approval. Whether you’re buying your first home or helping someone else take that first step, I’m here to help you make informed, confident decisions.

Worried About Your Mortgage Renewal? You’re Not Alone

By Katherine Martin • June 18, 2025
Worried About Your Mortgage Renewal? You’re Not Alone  If your mortgage renewal is coming up soon, you're likely feeling a bit of financial pressure—and you’re not the only one. A recent survey shows that over half of Canadian homeowners believe their upcoming mortgage renewal could impact their current living situation. With interest rates still higher than what many borrowers locked in before 2022, 45% of those renewing in the next 12 months expect their monthly payments to increase. Even though the Bank of Canada has held its key overnight rate steady at 2.75%, borrowing costs remain elevated compared to the low-rate years we saw earlier in the decade. And that’s changing how Canadians think about their finances. Changing Plans and Tightening Budgets Among those worried about their renewal, 73% say they’re already cutting back on discretionary spending—things like eating out, entertainment, or travel—to brace for higher mortgage payments. For many, it goes deeper than just trimming the budget. Nearly one in four surveyed homeowners said they’re rethinking their entire financial strategy. Some are pressing pause on home renovations (43%), while others are considering downsizing or relocating to a more affordable area (29%). A smaller group (15%) is even open to major lifestyle changes, like moving in with roommates or relocating to a new neighbourhood altogether. Fixed-Rate Mortgages on the Rise In this climate, most homeowners looking to renew are leaning toward fixed-rate mortgages, with 75% preferring the stability of predictable payments. For those facing uncertainty, locking in a rate for the next few years can offer peace of mind—even if it means paying a little more in the short term. First-Time Buyers Are Feeling It Too It’s not just current homeowners feeling the pinch. A separate survey found that more than half of Canadians planning to buy a home are cutting back on non-essential spending to save for their down payment or other buying costs. About 31% are even considering tapping into savings or investment accounts like TFSAs, RRSPs, or first-time home savings accounts to make their purchase possible. What This Means for You Whether you’re preparing to renew or purchase for the first time, this environment calls for smart, strategic planning. You’re not alone in feeling uncertain—but with the right guidance, you can navigate these changes confidently. Have questions about your upcoming renewal or wondering what type of mortgage is right for today’s market? Let’s connect. We're here to help you make informed, confident decisions about your home financing.
© 2025 

Katherine Martin. All Rights Reserved.