A BC buyer purchases a home for $850,000 with a 10% down payment and a 25-year amortization. Using the CMHC premium schedule for homeowner loans, what is the mortgage loan insurance premium?
Correct Answer
A) $23,715 (3.10% of $765,000)
The loan is $850,000 - $85,000 = $765,000, a loan-to-value ratio of 90%. CMHC charges 3.10% of the total loan amount for 85.01% to 90% LTV, so the premium is 3.10% x $765,000 = $23,715, which may be added to the insured loan.
Why This Is the Correct Answer
With 10% down the loan is $765,000 and the LTV is 90%. The CMHC rate for 85.01% to 90% LTV is 3.10%, and 3.10% x $765,000 = $23,715.
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