March 4, 20263 min read
If you are planning a purchase, understanding this topic before you submit an application can prevent surprises. Mortgage default insurance premiums are calculated as a percentage of the insured mortgage amount, with the percentage generally increasing as loan-to-value rises.
Key points to understand
Here is what matters most:
- Current CMHC homeowner premium schedules range by loan-to-value and can reach 4% of the mortgage amount at the highest standard insured loan-to-value tier.
- The premium is normally financed into the mortgage rather than paid entirely in cash.
- Because the premium increases the mortgage principal, it also increases total interest over the amortization.
- Provincial sales tax on the premium in Ontario is a separate closing cost and cannot be added to the mortgage amount.
Have your broker calculate the premium in dollars - not only as a percentage - before choosing your down payment.
Want this applied to your own numbers?
Call Phil Cragg at 866-349-4915 or request a written comparison.
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