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HOME BUYERS GUIDE
A comprehensive guide
to home ownership presented by the "The House Team"
MORTGAGE OPTIONS
Conventional:
Regulations under The Bank Act
prohibit Bank, Trust and Insurance Companies from lending in excess of 75%
of the purchase price or the appraised value of a
property without obtaining Mortgage Loan (High Ratio) Insurance. A loan for
up to 75% of the purchase price of a property is a conventional mortgage.
High ratio:
A loan for 75.1% to 95% of the
purchase price of a property.
Mortgage loan insurance (high
ratio): High ratio mortgages must be insured through CMHC (Canada Mortgage
and Housing Corporation) or GE (Genworth Financial Canada). CMHC and GE provide
default or high ratio insurance to the lenders protecting them against the
risk of lending to homebuyers who have less than 25% down payment available.
An insurance premium is paid
by the borrower on behalf of the lender. The insurance premium that is paid
to CMHC or GE is to protect the lender in the
event that the mortgage is not paid. This is not to be confused with life,
disability, or job loss insurance.
The insurance premium is calculated
as a percentage of the mortgage amount, depending on the loan to value, and
may be added to the mortgage amount.
The premiums are as follows:
Loan to Value Premium
75.1 - 80% 1.00%
80.1 - 85% 1.75%
85.1 - 90% 2.00%
90.1 - 95% 2.75% non borrowed down payment
90.1 - 95% 2.90% borrowed down payment
Other high ratio financing costs
include an application fee of $165 to $185.
Mortgage money sources:
There is a wide range of financial
institutions that are involved in the mortgage industry in Canada. Some of
these include: Chartered Banks Loan Corporations
Trust Companies Credit Unions Finance Companies Pension Funds Life Insurance
Companies Private Individuals
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