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Simple answers to Complex Questions and Complex Answers to Simple Questions. In real life, I'm a Greater-Toronto (Canada) Realtor with RE/MAX Hallmark Realty Ltd, Brokerage. I first joined RE/MAX in 1983 and was first Registered to Trade in Real Estate in Ontario in 1974. Formerly known as "Two-Finger Ramblings of a Forensic Acuitant turned Community Synthesizer"

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Sunday, September 12, 2010

How much the CMHC insurance cost?

Q.....How much the CMHC insurance cost?

from Zoocasa Ask the Pros

A.... Robert Ede



High Ratio (ie the ratio of Mortgage Amount to Property Value) Mortgage Insurance is offered by CMHC and a few other smaller players in Canada.



The original idea (National Housing Act)was to support New-Home buying after WW2 by reducing down payments to 5% and allowing buyers to borrow one mortgage at First Mortgage Rates.

The Alternative was 10-15% down, with a 75% First and the balance at Second Mortgage rates (2-10% higher).



The program was extended to Resale homes in ~1975.



Now very few transactions have a second mortgage as part of the Agreement of Purchase and Sale.



Today the insurance premiums vary with the type of property and the ratio of loan-to-value 60%, 65% etc up to 95%



The One-time Insurance premium is paid by the borrower (added to principal most often) while the beneficiary of the policy is the Lender - covering THEIR shareholders' risk for lending outside 'conventional' (originally 75% now 80%) mortgaging guidelines.



To evaluate the worthiness of Hi-Ratio insurance as a Borrower, the cost of the premium must be considered as an ongoing "borrowing expense" vis a vis the expenses to create any alternative way of financing the subject.(ie "borrowing expenses" can be upfront broker fees, appraisal fees, legal fees, standby fees etc + the interest/yr).



NB the fee covers that mortgage for as long as that mortgage exists.

If you move and "port" the mortgage with you, the premium is "still paid & in effect" even though you moved it to another house (with the same lender of course).



The premium is "still paid & in effect" on that mortgage amount, even if you increase the principal sum (with the same lender)



Compare all costs - upfront as well as the ongoing monthly costs to carry + the opportunity to buy with a lower down payment.

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