Hope this email finds you great and you're enjoying this warm weather....finally!
So i received an email from a mortgage broker today informing me that all the default mortgage insurers (C.M.H.C, Genworth, and Canada Guarantee) will be increasing their premiums. Here's the important part...conventional mortgages may see a rate increase.
For those that don't know, a conventional mortgage is when you have at 20% or more to put down on a mortgage. A high ratio is less than 20%
Traditionally if you had 20% or more down you would not have to pay the above insurer. The banks have been default insuring mortgages (with all 3 default insurers) where the down payment is in excess of 20%. So if a you are putting 20%, 30% 60% down payment as example chances are that mortgage will have to be approved AND insured with either C.M.H.C., Genworth or Canada Guarantee. Now typically the bank will cover the cost of the default insurer premium so it's not usually added to the mortgage when the down payment is 20% or more. Less than 20% down payment you the buyer pays the premium and it's usually just added to the mortgage.
What we are seeing are banks increasing rates on conventional mortgages making conventional mortgage rates higher than if a client has 5 - 20% down. Question is, besides maybe lower monthly payments, if there is a higher interest rate on conventional mortgages is it worth putting more than 20% down. A bit crazy I know. So with the vast majority of the banks back end insuring conventional mortgages and eating the costs of the premiums, they are unlikely to absorb the cost of the higher premiums coming this Friday and rather pass that increased cost along to the consumer. I expect further increases in conventional mortgage rates soon. How much? I wish I could tell you. It may not be much but I just want you to be prepared.
Suggestion, if you have been sitting on the fence about buying or selling and buying. I would suggest going to get at least a pre-approval right away to lock yourself in before this happens.
Thanks to Grant Borisow from Jencor for the heads up. Check out his website
If you want to chat more or if I can help refer you to a great mortgage broker, please feel free to contact me anytime. I'll take you for coffee...I might even pay. 🙂