Mortgage insurance needed?
Chad writes a column for the local Toronto Metro newspaper called Condo Q & A. The articles previously printed in the Metro News are reprinted below. Read on for great advice and tips on condos, lofts, and townhomes in Toronto!
Q:
What is mortgage loan insurance, and do I need it when I buy a condo?— Brian F., Toronto
A:
It depends on your down payment. For many people, the hardest part of affording their first home is coming up with the down payment.If you have less than 25 per cent to put down you will be required by your lender to purchase mortgage insurance, commonly referred to as CMHC, to protect your lender against default. This insurance allows buyers to purchase a home with as little as five per cent down or even less.This means your down payment on a $160,000 condo would be $8,000 and would carry for around as $865.00, based on a five-year term at today’s rates.Of course, there are other costs, including your property taxes, maintenance fees and your mortgage insurance premium. The premium is based on a sliding scale that is reduced when you put more money down. The premium starts at 0.5 per cent; it can go as high as 3.25 per cent and can be paid out on closing or, as a lot of buyers choose, add it to the mortgage. It should be noted that there is also 8 per cent PST on the premium, and this must be paid at closing.With a competent Realtor working for you, this whole process can be simplified.
Tags: mortgage insurance
