Recent Insurance Premium Increase Breakdown

Luisa Hough • 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.

Recent Posts

Mortgages Aren’t One-Size-Fits-All

By Luisa & Candice Mortgages • November 5, 2025
Why the Cheapest Mortgage Isn’t Always the Smartest Move Some things are fine to buy on the cheap. Generic cereal? Sure. Basic airline seat? No problem. A car with roll-down windows? If it gets you where you're going, great. But when it comes to choosing a mortgage? That’s not the time to cut corners. A “no-frills” mortgage might sound appealing with its rock-bottom interest rate, but what’s stripped away to get you that rate can end up costing you far more in the long run. These mortgages often come with severe limitations—restrictions that could hit your wallet hard if life throws you a curveball. Let’s break it down. A typical no-frills mortgage might offer a slightly lower interest rate—maybe 0.10% to 0.20% less. That could save you a few hundred dollars over a few years. But that small upfront saving comes at the cost of flexibility: Breaking your mortgage early? Expect a massive penalty. Want to make extra payments? Often not allowed—or severely restricted. Need to move and take your mortgage with you? Not likely. Thinking about refinancing? Good luck doing that without a financial hit. Most people don’t plan on breaking their mortgage early—but roughly two-thirds of Canadians do, often due to job changes, separations, relocations, or expanding families. That’s why flexibility matters. So why do lenders even offer no-frills mortgages? Because they know the stats. And they know many borrowers chase the lowest rate without asking what’s behind it. Some banks count on that. Their job is to maximize profits. Ours? To help you make an informed, strategic choice. As independent mortgage professionals, we work for you—not a single lender. That means we can compare multiple products from various financial institutions to find the one that actually suits your goals and protects your long-term financial health. Bottom line: Don’t let a shiny low rate distract you from what really matters. A mortgage should fit your life—not the other way around. Have questions? Want to look at your options? I’d be happy to help. Let’s chat.

Bank of Canada Rate Announcement Oct 29th, 2025

By Luisa & Candice Mortgages • October 29, 2025
Bank of Canada lowers policy rate to 2¼%. FOR IMMEDIATE RELEASE Media Relations Ottawa, Ontario October 29, 2025 The Bank of Canada today reduced its target for the overnight rate by 25 basis points to 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. With the effects of US trade actions on economic growth and inflation somewhat clearer, the Bank has returned to its usual practice of providing a projection for the global and Canadian economies in this Monetary Policy Report (MPR). Because US trade policy remains unpredictable and uncertainty is still higher than normal, this projection is subject to a wider-than-usual range of risks. While the global economy has been resilient to the historic rise in US tariffs, the impact is becoming more evident. Trade relationships are being reconfigured and ongoing trade tensions are dampening investment in many countries. In the MPR projection, the global economy slows from about 3¼% in 2025 to about 3% in 2026 and 2027. In the United States, economic activity has been strong, supported by the boom in AI investment. At the same time, employment growth has slowed and tariffs have started to push up consumer prices. Growth in the euro area is decelerating due to weaker exports and slowing domestic demand. In China, lower exports to the United States have been offset by higher exports to other countries, but business investment has weakened. Global financial conditions have eased further since July and oil prices have been fairly stable. The Canadian dollar has depreciated slightly against the US dollar. Canada’s economy contracted by 1.6% in the second quarter, reflecting a drop in exports and weak business investment amid heightened uncertainty. Meanwhile, household spending grew at a healthy pace. US trade actions and related uncertainty are having severe effects on targeted sectors including autos, steel, aluminum, and lumber. As a result, GDP growth is expected to be weak in the second half of the year. Growth will get some support from rising consumer and government spending and residential investment, and then pick up gradually as exports and business investment begin to recover. Canada’s labour market remains soft. Employment gains in September followed two months of sizeable losses. Job losses continue to build in trade-sensitive sectors and hiring has been weak across the economy. The unemployment rate remained at 7.1% in September and wage growth has slowed. Slower population growth means fewer new jobs are needed to keep the employment rate steady. The Bank projects GDP will grow by 1.2% in 2025, 1.1% in 2026 and 1.6% in 2027. On a quarterly basis, growth strengthens in 2026 after a weak second half of this year. Excess capacity in the economy is expected to persist and be taken up gradually. CPI inflation was 2.4% in September, slightly higher than the Bank had anticipated. Inflation excluding taxes was 2.9%. The Bank’s preferred measures of core inflation have been sticky around 3%. Expanding the range of indicators to include alternative measures of core inflation and the distribution of price changes among CPI components suggests underlying inflation remains around 2½%. The Bank expects inflationary pressures to ease in the months ahead and CPI inflation to remain near 2% over the projection horizon. With ongoing weakness in the economy and inflation expected to remain close to the 2% target, Governing Council decided to cut the policy rate by 25 basis points. 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. If the outlook changes, we are prepared to respond. Governing Council will be assessing incoming data carefully relative to the Bank’s forecast. The Canadian economy faces a difficult transition. The structural damage caused by the trade conflict reduces the capacity of the economy and adds costs. This limits the role that monetary policy can play to boost demand while maintaining low inflation. 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 December 10, 2025. The Bank’s next MPR will be released on January 28, 2026. Read the October 29th, 2025 Monetary Report

Smart Steps to Get Your Home Market-Ready

By Luisa & Candice Mortgages • October 22, 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.

Luisa & Candice Mortgages 

Contact Me Anytime!

The best way to get ahold of me is to submit through the contact form below. However feel free to give me a shout on the phone as well.

Contact Us