Did you know that making a 10% down payment instead of 5% saves you 0.75% on your CMHC (Genworth or Canada Guaranty) premium? So be mindful of how much you put down on the purchase of your home!
Here is a simple example of a mistake that is made all too often: if you have the intention of making a $30,000 down payment (slightly less than 10%) on a purchase of $305,000, your insurance premium will be $9900 which is 3.60% of your mortgage. However, if you increase your down payment by only $500 and make a down payment of $30,500 (exactly 10% of the purchase price), your insurance premium drops to $6,600 (2.4% of the loan). Therefore, you’re saving $2,062.50 dollars by simply adding $500 to your down payment.
Often, the amount needed to reach the next insurance premium level is too high for the buyer’s budget. However, it is always a good idea to make this calculation in order to avoid making a costly mistake.
Below is the table of insurance premiums (CMHC, Genworth, Canada Guaranty) for the purpose of an owner-occupied purchase.
Down payment % of the purchase price • Insurance Premium on the Loan Amount.
| Mise de fonds | Prime d’assurance |
| 5% | 3.60% |
| 10% | 2.40% |
| 15% | 1.80% |
| 20%* | 1.25% |
| 25% | 0.75% |
| 30% et plus | 0.60% |
*Normally, on a 20% down payment, there will be no insurance premium to pay. However, a bank may require that the loan be insured due to an increased risk present in the file, such as a property situated in a remote area, credit issues in the borrower’s file, an unstable revenue stream for the borrower, etc.
