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There are many different types of mortgages on the market today. The one thing they all have in common is whether they will need high ratio insurance or not. What determines whether you need this insurance is the amount of downpayment you have.
High Ratio or Insured Mortgage: A high ratio mortgage finances a higher percentage of between 80% and 100% of the appraised value or purchase price of the property, whichever is less. This means that you have less than 20% downpayment. This type of mortgage must, by law, be insured against non-payment by either the Canada Mortgage and Housing Corporation (CMHC) or another insurer such as GE. Mortgage insurance protects the lender against loss if the borrower fails to meet the repayment terms. The CMHC application fee and insurance premium ( listed below ) are paid by the borrower. The higher the ratio of mortgage to property value, the higher the cost of insurance. The fee is usually added to your mortgage.
CMHC rates blow: As of January 2008. These subject to change. Check with your lender for current rates. Note: some of the rates refer to values of less than 80% of value.This is for speciality properties such as commercial or rental properties that still might require CMHC insurance.
| Table of CMHC Mortgage Loan
Insurance Premiums |
|
| Loan Size (% of Lending Value) |
Single Advance Premium (% of Loan) |
| Up to and including 65% |
0.50% |
| Up to and including 75% |
0.65% |
| Up to and including 80% |
1.00% |
| Up to and including 85% |
1.75% |
| Up to and including 90% |
2.00% |
| Up to and including 95% |
2.75% 2.90% |
| Up to and including 100% |
3.10% |
| Note: See your lender for premium surcharges and other terms and conditions that apply. |
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Example: Say you were buying a $200,000 property and had no downpayment and had the
CMHC fee added to your mortgage the this is what the financing would look like.
| Purchase Price: | $200,000 |
| Down Payment Available: 0% | 0 |
| Amount of Mortgage: 100% | $200,000 |
| Mortgage insurance fee: 3.10% | $6,200 |
| Total mortgage: | $206,200 |
Conventional Mortgages: Under a conventional mortgage, a lender
will normally provide up to 80% of the appraised value or purchase price
of a property, whichever is less. You must be able to provide at least
20% of the value by your downpayment. The main difference between this
type of mortgage and a high ratio mortgage is there is NO insurance fee
on a conventional mortgage.
Example: Say you were buying a $200,000 property had a 20% downpayment
this is what the financing would look like.
| Purchase Price: | $200,000 |
| Down Payment Available: 20% | $40,000 |
| Amount of Mortgage: 100% | $160,000 |
| Mortgage insurance fee: 0 | 0 |
| Total mortgage: | $160,000 |
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