Why you need a CMHC Calculator
If your Down Payment is Under 20%…
The CMHC requires you to have mortgage insurance if your down payment is under 20% of the purchase price. This CMHC calculator helps you budget for the cost of mortgage insurance.
Bonus Financial Insight
How much is best for a Home Down Payment?
Like many areas of life, there is no right answer. It really depends on your unique situation. So, let’s instead look at the advantages of higher vs lower down payments.
PROs of CMHC Mortgages
You keep more of your total savings.
Since you don’t spend it all in your down payment, you still have funds remaining to invest as you see fit. The CMHC premium is spread out over the term of your mortgage, so you won’t “feel it” as much as using a greater significant portion of your available cash savings.
Easier access to the real estate market.
At the time of writing, the average cost of a detached home in Toronto is over 1 MILLION DOLLARS. This makes it very difficult for the average young family to save up enough for a down payment of 20%, ($200,000). With the CMHC, first time home buyers can enter with only 5% down ($50,000).
PROs of Higher Down Payments
Increased monthly cashflow.
With a higher down payment, your ongoing monthly mortgage payments are less than they would be with a CMHC mortgage premium on top. If you have a reserve of savings to invest, it might be worth considering spending more upfront to benefit from the greater long term cashflow impact on your mortgage expenses.
Greater immediate home equity.
If you want to use a Home Equity Line of Credit (HELOC) and leverage debt instead of burn cash, it might be a good strategy to put a higher down payment. You might even consider consolidating your debt to take advantage of the lower interest rate with a HELOC.
Do I HAVE TO get mortgage insurance?
Short Answer: No. Not if you have enough for the 20% down payment (or go through a private lender????)
Long Answer: If you don’t have enough for the 20% minimum down payment, but you still want to invest in a home, then you can take advantage of CMHC mortgage loan insurance.
Why? It lets you get a mortgage with only 5% down, for up to 95% of the home’s total purchase price. It also helps to secure a lower mortgage interest rate with your lender.
How much is the CMHC Minimum Down Payment?
CMHC mortgage loan insurance amounts are based on the purchase price of the home:
5% minimum if the home costs $500,000 or less
5% on the first $500,000 and 10% on the rest if the home costs more than $500,000
You CANNOT get CMHC mortgage loan insurance if the home costs $1,000,000 or more
What is the CMHC?
CMHC stands for “Canada Mortgage and Housing Corporation.” The CMHC is Canada’s official agency for national housing.
The amount of the premium is determined by the CMHC. This CMHC Calculator automatically includes the premium.
Note that CMHC only offers mortgage insurance when the purchase price is less than one million dollars ($1,000,000).
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