What have they become? Well, in one word – complicated.
Since more and more people are coming to us with troubling questions as to how they should handle their next steps, we thought we would share Sharron’s story.
Sharron has a $400,000 mortgage with an 20% downpayment adding up to $80,000. We have reproduced 3 scenarios courtesy of our Filogix system that Sharron can choose from. The numbers are as per their calculators.
You will receive a better rate by paying the 2.4% CMHC1 fee on the mortgage and get a 2.89% 5 year fixed rate. Premium in this case becomes $7,680.00 and the amount of interest paid over the 5 years based on just monthly payments would be $48,191. Balance on this scenario after 5 years is $279,488.
If you were to use a lender, they would not charge a CMHC fee (at least for now) but the rate is 3.39%. Over the 5 years they would have paid $50,286 in interest payments but the balance on the mortgage would be $275,537 at the end of the 5-year term.
Using a hybrid product such as 2MCAP 79 where you pay a 1% government fee so you are financing 80%, but in reality, you had to come up with 21% of the mortgage amount or $4,000 extra which is capitalized back into your mortgage. In this scenario, you currently get a rate of 3.09%, pay interest of $45,622 and have an end of term balance of $273,270.
To say the least this has become a game of really knowing your products and your clients. If the end game is to avoid paying CMHC, then you may end up paying too much elsewhere unless your broker has access to specialty products in the market.
Check with a HomeHow specialist to see what’s available today. Be like Sharron… call us!
1CMHC: Canada Mortgage and Housing Corporation
2MCAP: One of Canada’s largest mortgage financing companies