March 7, 20263 min read
Homebuyers often hear a rule of thumb, but prime mortgage underwriting is more detailed than that. CMHC mortgage loan insurance is one form of mortgage default insurance used when an eligible borrower has a high-ratio mortgage. Canada also has other approved mortgage insurers.
Where borrowers get tripped up
Here is what matters most:
- The insurance protects the lender if the borrower defaults; it is not life, disability or home insurance for the buyer.
- Premiums are based largely on loan-to-value and other program factors.
- The premium can generally be added to the mortgage balance, increasing the amount on which interest is paid.
- Ontario applies provincial sales tax to the mortgage insurance premium, and that tax cannot be added to the insured loan amount.
Ask for the exact premium and resulting mortgage balance so you can compare insured financing with a larger 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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