Understanding the Recent Increase in Mortgage Insurance Rates and How to get Money Back

Once again, the homebuyers are hit with tightening from the government. This new regulation comes in the form of CMHC increasing the premiums for mortgage insurance. The effect of these premium increases are realized by the borrower as a $5 to $10 increase in a monthly payment. In the big picture of the regulations that have been taking place recently, it is a minor irritant in comparison.

Now, it is important to understand who this mortgage insurance policy is protecting. Macroeconomically, the mortgage insurance is protecting the homeowner through keeping our economy and housing market soundly cushioned from the event of a collapse. However, there are many other safeguards in the housing and mortgage lending industry that are already creating a safe environment so that borrowers do not get exposed to rate fluctuations. The recently introduced Benchmark qualification is one of those tough but effective safeguards. Directly, the mortgage insurance premium protects the lender much more than the homeowner, and that cost of premium is the borrowers burden. Indirectly, we as homeowners are protected via a solid housing market.

To be fair to CMHC, it was not their decision to increase their premiums but OSFI’s new capital requirements which forced them to keep a larger capital holdings relevant to their market exposure. This increase of capital holdings will create a larger buffer for the mortgage insurers if they are to experience capital losses in the form of foreclosures or defaulted mortgages, which helps to insure long term financial stability. OSFI, or The Office of the Superintendent of Financial Institutions, is an independent federal government agency which supervises financial institutions and makes sure that there is a safe balance between competitive capabilities and risk reducing practices so that Canada’s financial markets and economy are safeguarded. I’ve kept OSFI’s description succinct because it may become a little long winded. If you would like to learn more about OSFI please follow this link.

So now we need to consider: can we avoid these premiums? The answer is no. Not if you are a high ratio purchaser. But there are ways to recoup some of the expense and Oceanvale Mortgage & Finance can help.

There are a couple of options:

There are government grants, for one, which the government will pay to the homeowner if certain measures are taken. There is a Home Renovation Rebate program which offers up to $1,400 in rebates as well as a New Home Program that offers rebates of up to $2,000 for building energy efficient homes. These are not stand alone, there are many other ways to save via government rebates. Here is a link to have a look at what else is offered: https://www.fortisbc.com/Rebates/RebatesOffers/Pages/Results.aspx?type=homes&city=Nanaimo

Another option is looking to CMHC for rebates. They can potentially cut you a cheque for up to 25% of the total insurance premium amount if you build, renovate, or purchase an energy efficient home. This can translate in to thousands of rebated cash in your pocket.

There are two tiers of insurance premium rebate programs. One is the 25% of the insurance premium rebate for a R2000 home. And the other is the Energy Star 15% rebate. The R2000 rating on a home is more than just an energy efficient home; it has the best in class energy efficient rating as well as being built with leading edge techniques. An Energy Star home is built or renovated to be on average 20% more energy efficient than homes built to standard code.

We touched base on quite a few topics here, if it is a little overwhelming and you would like more clarity I invite you to come by our office, email or give us a call today. Actually, I would recommend talking to us if you are considering a purchase and would like to save as much money as possible; not only do we have great rates and products we also have the expertise to offer you great advice, knowledge, and service.

At Oceanvale Mortgage & Finance, we can guide you through the process of applying for these grants and rebates. We will make sure that you acquire as much savings as possible on your insured mortgage because every dollar that you can save is worth taking the time to work towards. Whether it is a purchase of an energy efficient home or a purchase plus improvement to reach the efficiency that is needed, we can help!

Nolan Smith