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Press Releases/News
The ABC'S of Mortgage Loan Insurance October 2009 FOR IMMEDIATE RELEASE One of the key aspects of buying a home is saving for the down payment. Mortgage Loan Insurance from Canada Mortgage and Housing Corporation (CMHC) can help bring homeownership within reach, with as little as 5% down. What is Mortgage Loan Insurance? Mortgage Loan Insurance is just that — insurance from a trusted third party, which protects lenders against default on a mortgage loan by a homeowner. In Canada, Mortgage Loan Insurance is generally required whenever a homebuyer has less than 20% of the purchase price available as a down payment. Because the lender is protected, they are able to offer mortgage financing even if you have a smaller down payment, at a rate of interest that is comparable to the lower rates typically reserved for homebuyers with a larger down payment. To obtain Mortgage Loan Insurance, an insurance premium must be paid based on the total amount of the loan (the purchase price minus the down payment). This premium can be paid in a lump sum, or added to your mortgage and included in your monthly payments. How Much Does it Cost? In general, the larger your down payment, the lower your premiums will be. The exact premium will be calculated when you apply for a mortgage. But to give you a general idea, the current Mortgage Loan Insurance premiums charged by CMHC are: Size of down payment (as % of purchase price)* Insurance premium (as % of total loan)** 15% to less than 20% 1.75% 10% to less than 15% 2.00% 5% to less than 10% 2.75% or 2.90%*** * Mortgage Loan Insurance from CMHC is also available for loans of less than 80% of the purchase price. ** Premiums in Ontario and Quebec are subject to provincial sales tax. The provincial sales tax cannot be added to the loan amount. *** The rate of 2.90% is for mortgage loans where the down payment is funded through non-traditional sources, such as borrowed funds, gifts, 100% sweat equity or lender cash back incentives. For an additional premium, CMHC Mortgage Loan Insurance is also available for loans with extended amortization periods. The additional premiums are: Loan with amortization period greater than 25 years and up to 30 years: +0.20% Loan with amortization period greater than 30 years and up to 35 years: +0.40% For example, if you are buying a $200,000 home with a down payment of $10,000 (or 5% of the purchase price) amortized over 25 years, the Mortgage Loan Insurance premium would be 2.75% of your $190,000 loan, or $5,225. If you chose to extend the amortization to 30 years, an additional premium of 0.2% or $380 would be charged. Laurie Furness , AMP Mortgage Agent FSCO Lic #10716 The Mortgage Centre 418 North Service Rd 1D Oakville, Ontario, L6H 5R2 Tel: 905-337-7375 Fax: 905-337-7376 Pager: 416-200-6656 admin@lauriefurness.com www.lauriefurness.com FSCO Lic #10716 We are independent of CMHC and we are providing this document as CMHC information only. About R.D.M. Financial Consultants A Mortgage Centre franchise since 1990,we boast a staff of 12 Mortgage professionals serving Mississauga, Etobicoke, Burlington, Milton and surrounding areas. With the combined experience of our Mortgage Professionals we are able to deal with almost all mortgage and financing requirements. For more information, please visit us on the web at www.rdmmortgages.com or call us at (905) 337-7375. << Back to Press Releases |
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