CONVENTIONAL MORTGAGES HAVE BECOME…
What have they become? Well in one word complicated. I just ran some numbers for a client and it is based on a $400,000 purchase with 20% or $80,000 down payment. These three scenarios have been reproduced in our Filogix system and the numbers are as per their calculators.
Scenario one is get a better rate by paying the 2.4% CMHC fee on the mortgage and get a 2.89% 5 year fixed rate. Premium in this case becomes $7680.00 and the amount of interest paid over the 5 years based on just monthly payments would be $48,191. Balance on this scenario after 5 years is $279,488.
Scenario two would be just use a lender who doesn’t charge a CMHC fee (at least for now) but the rate is 3.39%. Over the 5 years they would have paid $50,286 in interest payments but the balance on the mortgage would be $275,537 at the end of the 5-year term.
Scenario three is use a hybrid product such as MCAP 79 where you pay a 1% government fee so you are financing 80%, but in reality, you had to come up with 21% of the mortgage amount or $4,000 extra which is capitalized back into your mortgage. In this scenario, you currently get a rate of 3.09%, pay interest of $45,622 and have an end of term balance of $273,270.
To say the least this has become a game of really knowing your products and your clients. If the end game is to avoid paying CMHC then you may end up paying too much unless your broker is as we are and has access to specialty products in the market. Check with your Dominion Lending Centres Mortgage Broker to see what’s available.