“We do a lot of talking on this blog about CMHC mortgage insurance, the high price it can cost you, and mostly, how to avoid paying it altogether. This insurance of course, is required by home buyers that have less than 20% for the down payment of their new home, and it protects the lender should you default on your mortgage payments. But why is it important to try and avoid paying mortgage insurance, if possible? How much will it actually cost you?
CMHC mortgage insurance is based on a percentage of the home’s value, as well as how much of a down payment you have. CMHC has currently broken down the amounts into three different levels:
- 15% to under 20% of a down payment has an insurance premium of 1.75%,
- 10% to under 15% of a down payment has an insurance premium of 2%,
- 5% to under 10% of a down payment has an insurance premium of 2.75%
In addition to the initial premium, CMHC also places extra fees on mortgages that have an amortization period of 25 years or longer. For those that are amortized over a period of 25 – 30 years, there is a surcharge of 0.2%. If the mortgage is amortized over a period of 30 – 35 years, that surcharge doubles, going up to 0.4%.
While the costs can seem pricey, you shouldn’t think of CMHC mortgage insurance as evil in the mortgage world; in fact it’s just the opposite and allows many people who wouldn’t be otherwise to obtain a mortgage and become homeowners.
If you’re especially worried about the fees that CMHC charges, speak to an Ottawa mortgage broker. They’ll know the ins and outs of what CMHC has to offer (and what you’ll have to pay;) but they may also know of private mortgage insurance that’s also available, and might be able to save you some money. “
