What is CMHC Mortgage Insurance? CMHC stands for Canadian Mortgage and Housing Corporation, this is a Crown Corporation run by the Federal Government that was created to help people get a house in Canada with little or no down payment money. One of CMHC s main purposes through its Mortgage Insurance is help to allow anyone who may be purchasing a house in Canada, either through inheritance or through a first time buyer, to buy a house without having to make a down payment on it. The down payment is simply the buyer’s down payment money.
What is the amortization? The amortization period is the length of time that you will pay your mortgage on an installment basis. This term is generally referred to as your amortization period. As you know, the longer that you pay on your property purchase, the more money you will make over time. With a longer amortization period, you will be able to make your payments and make money; however, if your payments are too high at the end of the amortization period, you may find yourself owing more money than you would if you had paid them lower.
Why is the premium associated with the mortgage insurance so high? As with any other mortgage, the amount of your premium is based on the type of mortgage you choose. For instance, there are two types of interest rates available for this type of mortgage insurance; namely, variable and fixed premiums. Variable premiums can fluctuate up and down, whereas a fixed premium never changes. Another variable used with these insurance policies is the minimum payment amount, which is also known as the down payment amount.
What is the CMHC Mortgage Insurance payment rate? It’s also called the gross debt service ratio. This is the percentage of your mortgage amount that is going toward your monthly payments each month. Lower payments mean a lower CMHC Mortgage Insurance premium. Your lender will determine the exact formula for calculating your payment ratio, but you can rest assured knowing it’s somewhere around ten to twenty percent.
Why do some borrowers pay mortgage insurance but not others? This is because those who don’t have coverage don’t often bother to request it. On the contrary, those who want coverage often pay the higher premiums. This is primarily due to the fact that those who don’t have mortgage insurance are considered to be risky borrowers by those lenders that offer it. The result: Those borrowers who have mortgage insurance get special treatment from lenders, who then pass on the higher premium rates to customers.
Do I have to pay for my CMHC Mortgage Insurance every month? No. Once you’ve determined your payment amount and your mortgage amount, the insurer pays your mortgage insurance premium for you. You’re not obligated to pay this premium. This doesn’t mean you should forgo paying your monthly mortgage insurance premium.
Why do some borrowers to get rid of their life insurance policy when they take out CMHC Mortgage Insurance? In most cases, life insurance policy holders are required to pay premiums annually. However, if they take out mortgage insurance, they’re only required to pay monthly premiums. This makes life insurance more attractive to borrowers who need coverage but can’t afford to purchase it. Moreover, the insurer, which in most cases is the bank, pays your CMHC Mortgage Insurance premiums.
Does my current lender offer me a special deal on my mortgage? Yes, some lenders do offer special deals on their mortgages to get you to sign up for mortgage insurance. For instance, some lenders may offer to waive a certain percentage or annual fee on mortgages if borrowers purchase CMHC Mortgage Insurance from them. If you know you can’t find competitive rates elsewhere, you may consider looking for a special introductory offer from a lender with which you have a business relationship.
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