If I was CMHC would I have increased the premiums??
That would not be my master plan that is for sure. Yes, this could this open the door for the other two private companies can keep their rates the same and increase their market share. However we both know they will more than likely follow suit and raise their premiums as well.
They stated they are trying to reach their capital targets, which strengthens the financial system. What I think they might really be doing is still trying to cool off the housing market.
They made over a billion in the first 9 months of 2013, so I am sure that this might not the whole story.
Last night I was speculating what other announcement would be made, and I thought about privatization, about them making the max loan to value 90% instead of 95%, about the inherent risk if defaults increase faster than the premiums. For some reason the higher premiums I had doubts as too if this was what they were really going to do.
What is changing? May 1st, the insurance premiums rate for a new home purchase by 15%.
What does that mean for a home worth 750,000 with 5% down?
Well the mortgage would be $712,500 plus the premium of $19,593.75
The new premium would now be $22,443.75
You are still paying interest on that over the 25 years which does work out to $1,323.75 and a monthly increase to your payment of $13.92
What are you paying on the total premium? $109.59 a month and $10,429.40 in interest over 25 years.
Making the total cost to you: $32,873.15
I used a low rate of 3.29 as well, so if interest goes back up over the next 25 year you would be paying more!
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