Son Of A Broker » Economy

What is CMHC Mortgage Insurance Good For?

chris — Thu, 29 Apr 2010 20:22:54 +0000

I have observed recently that both first time home buyers and seasoned owners alike struggle to understand CMHC insurance. From a borrower’s perspective the insurance premium paid up front for the benefit of a mortgage lender seems heavy handed and unfair. However, without CMHC you wouldn’t be able to buy or refinance your homes unless you had 20%, or more for the down payment. Even if a lender would entertain financing, without insurance, a mortgage lender would make you pay for their exposed risk through much higher interest rates.

Let’s just review why and what mortgage insurance is?

In Canada, it’s because of CMHC that lenders are willing to lend to borrowers who buy without large down payments. In the not to distant past (CMHC history), Canadian homebuyers had to purchase with much larger down payments. This is still the reality in many other countries today where there is no insurance available. Home buyers need to purchase with a 25% to sometimes 50% down payment making home ownership difficult.

CMHC insurance is a one time premium that is added up front to your required mortgage amount (you do not have to pay for it out of pocket) and insures the lender if default occurs. Although it seems like real estate is a forever increasing asset this is not always true. Markets can turn very quickly, as we recently saw in the U.S.. After legal fees, real estate fees and market corrections a lender can easily lose money if there is not enough equity or down payment.

The insurance premium is determined by a table depending on how much downpayment you bring to the purchase. You can find the rates here.

5% down- 2.75% premium

10% down – 2.00% premium

15% down -1.75% premium

In addition, there’s a 0.2% premium that is added for each additional 5 years of amortization above the traditional 25 year amortization. You should also be aware that included in your closing costs there is PST at 8% on the insurance premium.

It does seem a little discouraging and frustrating to have to pay this premium on top of all the other fees that you incur as a homebuyer. However, it serves a very important purpose to keep the mortgage interest rate low and give you the opportunity to own a home with less than 20% down. The couple thousand dollars that gets added on top of the mortgage makes a difference of about $20 each monthly payment. In retrospect it is a small price to pay for the satisfaction and pride of owning your own home.

So, there’s a snapshot on the CMHC insurance. Of course, every situation is different and requires a full analysis. If you have any questions, please feel free to contact me. I’d be happy to hear from you.

Chris Molder – Toronto mortgage broker
416.461.0204
chris@tridacmortgages.com

Mortgage Reforms Announced This Week

chris — Thu, 18 Feb 2010 23:35:23 +0000

This week Jim Flaherty and his Federal Department of Finance announced some important reforms to the rules governing mortgage qualification. See my reaction in the video below.

Click here to view the embedded video.

Monday Mortgage Minute – January 18th 2010

chris — Mon, 18 Jan 2010 05:11:59 +0000

Toronto mortgage interest rates have taken a definite U turn from the direction predicted by economists at the beginning of the year. It looks like low interest rates may be here to stay for a while longer. I can currently offer a 5 year fixed at an unprecedented low rate of 3.75% subject to lender restrictions. However it is a very clear indication of where rates are headed. Last week some conservative lenders had increased their fixed 5 year rate to 4.50% but were quick to reverse that decision. If you don’t see a rate here or have any questions please contact me.

Chris Molder – Son Of A Broker

1 year fixed – 2.30%

3 year fixed – 3.45%

5 year fixed – 3.89%

3 year variable – Prime-.10% (2.15% effective rate)

5 year variable – Prime-.25% (2.00% effective rate)

RATE SPECIALS

5 year fixed – 3.75% (must close by Feb 23rd 2010, purchase & refinance only)

3 year variable Prime-.30% (1.95% effective rate closing in 30 days, purchases & refinance only)

NOTE: Rates are subject to change without warning at the lender’s discretion.

Click here to view the embedded video.

Monday Mortgage Minute – Dec 14th 2009

chris — Tue, 15 Dec 2009 03:51:54 +0000

Very few changes this week to mortgage interest rates in Toronto.

1 year fixed – 2.60%

3 year fixed – 3.40%

5 year fixed – 3.99%

3 year variable – Prime-.10% (2.15% effective rate)

5 year variable – Prime-.10% (2.15% effective rate)

RATE SPECIALS

5 year fixed – 3.89%

3 year variable Prime-.25% (2.00% effective rate closing in 30 days, purchases & refinance only)

Click here to view the embedded video.

To get in touch with me send me an e-mail or call 416.461.0204 ext 2.

Christopher Molder – Son of A Broker

Monday Mortgage Minute – Dec 7th 2009

chris — Tue, 08 Dec 2009 02:08:20 +0000

Mortgage interest rates in Toronto have stayed fairly steady over the past week despite the increase to bond yields last Friday. Tomorrow the Bank of Canada will decide on whether to increase the prime rate. There is unanimous consent among economists that the prime rate will remain unchanged however it will be interesting to see what economic data the Bank of Canada will release with their decision. The data may impact fixed rate mortgages. If you don’t see a rate that you are looking for or have a specific mortgage question email me here.

1 year fixed – 2.60%

3 year fixed – 3.49%

5 year fixed – 3.99%

3 year variable – Prime-.10% (2.15% effective rate)

5 year variable – Prime-.10% (2.15% effective rate)

RATE SPECIALS

5 year fixed – 3.89%

3 year variable Prime-.25% (2.00% effective rate closing in 30 days, purchases & refinance only)

DISCLAIMER: All rates are subject to change at any time without notice.

Click here to view the embedded video.

Get Smart About Money

chris — Fri, 27 Nov 2009 14:12:03 +0000

Not sure what the difference between a mutual fund and a exchange traded fund (ETF) are? The Investor Education Fund has developed an excellent new website GetSmartAboutMoney.ca which develops and promotes financial literacy which is especially directed for young people. Even though I grew up surrounded by money concepts, I really feel like there was a gap in formal education especially as an adolescent … please share this site with your family and friends here is one of their edgy but effective promotional videos. A classic.

Money is a current, a carrier, and a conduit for our intentions. Christopher Molder – Son of a Broker

Click here to view the embedded video.

95% Mortgage Financing and The Canadian Mortgage Market- Episode #1

chris — Tue, 27 Oct 2009 18:23:50 +0000

Click here to view the embedded video.