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Canada Mortgage and Housing Corporation (CMHC)

Submitted by Colin Hendry - Internet Realtor
Visit Colin's Profile for more information by phone.

Since 1946, CMHC has formed partnerships with Canadians to combine their name behind yours to help you get the financing you need.

If you are like most Canadians, the purchase of a home will probably be the single largest expenditure of your life, at least until now. CMHC insures your loan against default to make it easier for you to obtain financing from a bank or mortgage company.

For most of us, the hardest thing about buying a home--especially a first home--is saving the necessary down payment. If you have less than 25% to put down on the property, you need Mortgage Loan Insurance. Buyers with CMHC Mortgage Loan Insurance can buy a property with as little as 5% down. By providing default insurance to financial institutions, CMHC limits the risk to approved lenders and they respond with loans of up to 95% of the purchase price at competitive interest rates.

HERE IS HOW IT WORKS

You come up with 5% of the purchase price--and they will insure a loan for the rest. Before you know it, you will be on the way to owning your home.

Affordability: Low fees, easy payments

Application Fee: To begin the process, you pay an application fee up front (maximum $235). Your approved lender will take care of all the paperwork. CMHC deals with financial institutions from coast to coast, including Canadian chartered banks, trust companies, credit unions, and life insurance companies.

Premium: This is the cost of insuring your loan. When the application is approved, the Mortgage Loan Insurance premium is calculated as a percentage of the loan, with the rate depending on the size of your down payment. The premium can be paid in a single lump sum at the time of purchase or it can be added to your mortgage and paid as part of your monthly payment.

Example:
Loan size (% of purchase price) Premium (% of loan)
Up to 65% 0.50%
Up to 75% 0.75%
Up to 80% 1.25%
Up to 85% 2.00%
Up to 90% 2.5%
Up to 95% 3.75%

Portability: Who knows what the future holds. Today, you think you are going to live in this home forever. Tomorrow, you may be faced with an unexpected need to move. Don't worry. CMHC Mortgage Loan Insurance is portable. Borrowers in good standing who decide to sell their home can readily transfer the Mortgage Loan Insurance to a new mortgage for a different home in any part of Canada under certain terms and conditions.

How Much Mortgage Debt Can you Carry?

Your payments for principal, interest, property taxes and, if applicable, 50% of condominium fees should amount to no more than 32% of your gross monthly household income. Furthermore, you should have a total debt ratio of 40%. Here are some examples:

Gross Debt Service (GDS)

Example:
Principal and Interest $939.75
Property Taxes $160.00
Heating Costs $105.00
Total Monthly Payments $1,204.75
Gross Monthly Household Income $5,500.00


GDS: $1,204.75 x 100/$5,500 = 21.9%

Total Debt Service (TDS)

Example:
Total Monthly Housing Payments $1,2.04.75
Other debts/loans $350.00
Total: $1,554.75
Gross Monthly Income $5,500.00


TDS: $1,554.75 x 100/$5,500 = 28.3%

Example is based on a $105,000 mortgage with a 10% interest rate amortized over a 25-year period. If the Mortgage Loan Insurance is not added to the loan, include it in the calculation of monthly payments.

Choice--A full range of qualified housing

You can get CMHC Mortgage Insurance for almost every kind of property--new or resale, already built or built for you. For example, all of the following properties qualify for Mortgage Loan Insurance, with just a few conditions:

Apartments in low-rise or high rise buildings
Townhouses and row houses
Single detached or semi-detached homes
Mobile homes, single or multiple width
Modular homes
Manufactured homes (on land you own or lease)
Floating Homes

What house can you afford?

These tables give you an idea of the maximum house price you can afford. The estimates take into account household income and the percentage down paymentyou have made. The assume a mortgage interest rate of 10%, average tax and heating costs in Canada and the mortgage an average Canadian would qualify for based on a 32% debt ratio.


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