The latest federal budget promised to “propose new measures to ensure that Canadian consumers are charged no more for mortgage insurance than the true cost of obtaining that insurance.”
When your down payment on a house is less than 20% of the purchase price, you normally have to pay for insurance provided by the Canada Mortgage and Housing Corporation (CMHC). If you default on your mortgage, CMHC covers the bank’s losses.
Like many items in the budget document, the meaning here is not entirely clear. My best guess is that the budget seeks to stop lenders from unreasonably marking up the cost of insurance provided by CMHC. CMHC provides a table of rates that makes it easy enough to check what you should be paying, but maybe few people actually bother to check.
It never occurred to me that banks would do anything but add the exact amount of the CMHC premium to the mortgage principal. But, I guess that isn’t a very good way to run a business. Adding service charges are a core competency of banks.
Another possible interpretation of the budget language is that the government intends to overhaul the CMHC premiums, but this seems unlikely.
Are there any readers out there with direct experience with being overcharged for CMHC mortgage insurance?