A client buys a $600,000 home in Alberta with a 10% down payment and a 25-year amortization, and the mortgage is insured by CMHC. Using CMHC's premium table, what is the mortgage loan insurance premium?
Correct Answer
B) $16,740
The mortgage is $600,000 − $60,000 = $540,000, a loan-to-value ratio of 90%. CMHC's premium for a loan-to-value ratio of 85.01% to 90% is 3.10% of the total loan, so the premium is $540,000 × 3.10% = $16,740. CMHC applies provincial sales tax to premiums only in Quebec, Ontario and Saskatchewan, so none is added in Alberta.
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