In order for you to obtain a mortgage, you will have to come up with some money of your own. Your own money will act as the down payment and will vary depending on how much you can afford to save.
The Canadian government allows you to use a down payment of as low as 5% of your home’s purchase price. Whether your down payment is 5% or 19%, you will need to acquire mortgage insurance. The amount of mortgage insurance differs from homeowner to homeowner. To get an estimate of what yours will be, you can use a mortgage insurance calculator.
This specialized tool is used to calculate how much insurance you’ll be paying on your mortgage. Insurance is charged to you in the form of a premium. In order to determine the mortgage loan insurance premium, your down payment and the full amount of the loan is taken into consideration. Mortgage insurance premiums are calculated as a percentage of your loan’s value and the size of your down payment.
The larger your down payment, the less you will pay in insurance premiums.
The calculator uses the below information to determine the price of your insurance premium:
When you apply for your mortgage, you will be told the exact price of the insurance premium. You can pay this premium in one lump sum or it can be included in your monthly mortgage payments. Some people feel more comfortable paying it all at once while others prefer to have it rolled into their monthly payment. Whether you pay the premium in a lump sum or over the course of your mortgage terms, it is up to you.
Without mortgage insurance you avoid paying the premiums, but you will be given a much higher interest rate for your mortgage. For most people, the savings lie with mortgage insurance and they want to dodge the higher rate. Additionally, if your down payment is less than 20%, you are required to purchase mortgage insurance.
As of June 1st, 2015, mortgage loan insurance premiums for homebuyers who make a down payment of less than 10% will increase by 15%. This translates to roughly $5-10 extra dollars added to your monthly mortgage payments. This is only applicable if you have not agreed to pay your premium in one lump sum.Back
Canada’s mortgage website
Your home is your most valuable asset. It is probably the single largest investment you will make in your lifetime. Your home is more than a place to rest your head and raise a family. Your home contains equity. It is a treasured resource and in some cases, can even be used as an ATM (aka cash back mortgages and HELOCs – don’t worry we’ll get there).
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