How to Calculate CMHC Insurance – Mortgage Math #5 with Ratehub.ca


When you’re purchasing a home in Canada with
less than twenty per cent down, you’ll have to pay mortgage default insurance. You might
have heard of your friends refer to it as CMHC insurance. But how much extra will it
cost you?  
We’ve brought in Mortgage Broker Frank Uithoven to walk you through the calculations.
  For this example, let’s say you purchased
a home worth four hundred and seventy-four thousand dollars, and you saved up forty thousand
dollars towards the price of your new home.  
The first thing you want to do is calculate what your new mortgage amount will be. To
do that, it’s your purchase price minus the down payment. So, using our example, we’re
going to take the home price less the down payment. That’s going to leave us with a new
mortgage amount of four hundred and thirty-four thousand dollars.
  Next, we want to calculate the down payment
as a percentage of the purchase price. To do that, we’re going to divide the down payment
of forty thousand dollars into the home price of four hundred and seventy-four thousand
dollars. For our example, that’s forty thousand dollars divided by four hundred and seventy-four
thousand dollars, which gives us eight-point-four-four percent.
  Next, we’re ready to calculate your mortgage
insurance premium. This is your mortgage amount multiplied by your premium percentage. But
where do we get your premium percentage from?  
This chart will help you determine what your premium percentage will be, based on your
down payment amount. So, this means that with an eight-point-four-four percent down payment,
you’re looking at a two-point-seven-five percent premium.
  Multiply your mortgage amount by your mortgage
premium of two-point-seven-five percent. That’s going to leave you with eleven thousand nine
hundred thirty-five dollars, which is how much your mortgage insurance is going to cost
you.  
Our last step is calculating your new total mortgage amount. To do this, you’re going
to addyour insurance premium to your mortgage amount. Using our example, we end up with
an amount of four hundred and forty-six thousand nine hundred thirty-five dollars.
  If you want to decrease your insurance premium,
you will need to increase your down payment. Additionally, for homes valued over one-million
dollars, you are required to put a minimum of twenty percent down, as you do not qualify
for mortgage default insurance.

8 comments

What an incredibly useful video. I found it so hard to figure this out just by visiting the CHMC site. Thank you kindly for this breakdown!

My guess would be Bruce, Ratehub provided the numbers before he filmed the vid.  Think about it.  Some useful info here that CMHC is not clear on with their site.

To new home buyers, don't waste your money paying needless CMHC fees just because you want a house NOW but had a crap down payment. Wait! Be smart, work your tail off for the next few years, rent,  and then drop 25%DP on your principal. You'll save several grand and be way further ahead in the long run. And if your income takes a dive for a while you can actually survive the drought and not foreclose like so many others who are in over their heads buying on credit.

The correct final mortgage amount would be $445,935. Seems to be a typo. Either way, this video explains it so well 🙂 Thanks, Ratehub

if you build up equity in the property and have to refinance for instance after a period of 5 yrs, would I be required to continue paying the CMHC insurance premium, assume not but wanted to know, whomever can answer thanks

with the housing market out of control, CMHC insurance needs to go. Not many people can afford a down payment of 20%. If the homeowner defaults. Doesn't the lender acquire the property?

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