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By Bruce Sellery on August 10, 2015
Estimated reading time: 1 minute

Is the CMHC’s mortgage insurance calculator wrong?

By Bruce Sellery on August 10, 2015
Estimated reading time: 1 minute

A 20% down payment should eliminate the need for mortgage loan insurance

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Q: MoneySense says that a 20% home down payment waives any mortgage loan insurance premium. However, when I enter a purchase price of $250,000 with a down payment of $50,000 on the CMHC’s website calculator it gives me a mortgage insurance premium of $2,500, not $0. What gives? —Jonathan Kuzub, Ottawa A: As you rightly point out, a down payment of at least 20% of the purchase price should eliminate the need for mortgage loan insurance. I tried both the CMHC and Genworth calculators with an even more dramatic example—a down payment that covered 80% of the purchase price—and it still showed that I would have to pay insurance of $300. The CMHC disclaimer states that, “This calculator will return a premium amount regardless of the down payment amount entered.” The reason is that many lenders will still purchase mortgage loan insurance on homes with a down payment of more than 20%—they just don’t pass on the cost to the borrower. I personally think the calculator would be more useful if the algorithm used an “if/then” statement to eliminate this confusion. In any event, you earn lots of good karma for pointing this out and reminding us that these types of calculators are not always clear. Ask MoneySense: Leave your question for Bruce Sellery »

About Bruce Sellery

Bruce Sellery is the CEO of Credit Canada, the country’s longest-standing non-profit credit counselling agency. He is a former MoneySense columnist.

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