What is CMHC?
CMHC stands for Canada Mortgage and Housing Corporation. CMHC protects lending institutions from mortgage default by providing mortgage loan insurance.
When do I have to pay CMHC insurance?
If you purchase a home and make a down payment that is less than 20% you will be subject to paying CMHC insurance premiums. You may also need to pay CMHC if the home you want to purchase poses other risks to the lender such as a poor location, etc.
When my husband and I bought our first home we started off with a 5 year fixed rate mortgage with an amortization of 25 years. Within our first year when we looked at our mortgage statement we were floored when we discovered that we had spent more than $7000 in interest in our first year!!! We could hardly believe that on such a small mortgage the interest would be so high. And we had a pretty good interest rate at that time, too. Our interest rate was 4.99% when most people were stuck paying at least 6%.
Buying extra life insurance that is attached to your mortgage may be a good idea for some folks; however, there are a few things you should consider before making your decision.
1. Do you already have life insurance? You may already have adequate life insurance through your work or another company. If you already have enough to cover all expenses plus your mortgage, then you have no need for additional insurance. However, if you dig up your paperwork and discover that you don’t have enough to cover all anticipated expenses plus your mortgage, you may very well benefit from buying mortgage life insurance.
I received a great tip from a reader recently about green mortgages. If this concept is new to you (as it was to me) you are probably wondering what a green mortgage actually is.
To put it simply, a green mortgage is when you borrow money to make upgrades on your home in order to make it more energy efficient and environmentally friendly. You get to borrow the money as part of your mortgage so you can make one single payment instead of two. And, as mortgages usually have lower interest rates than other types of loans, you will be able to borrow at a fairly low interest rate.
As most of you know, the Bank of Canada raised interest rates again on September 8th and as a result, my husband and I decided it would be a good idea for us to put another $5000 towards our open variable mortgage. Although our interest rate is only at 3%, we know that we can get less than half of that in interest if we keep it in a savings account.
If our plan was to stay in our existing house for another 5 years or more, it would be really tempting to just fix our mortgage as the fixed interest rates are still really reasonable right now, and it is certain that the interest rate on our variable mortgage will continue to rise, albeit more gradually for the next little while.