How to calculate mortgage default insurance rates
Whether you obtain mortgage insurance from the CMHC, Sagen or Canada Guaranty, all three providers charge the same premiums. Premiums are calculated as a percentage of the purchase price, based on the down payment. The loan-to-value ratio measures the size of the loan against the price of the property being purchased.
Example: You want to buy a home that costs $700,000. Let's say your down payment is $105,000 (15%). This means your mortgage balance is $595,000. Your loan-to-value ratio is 85%, so the mortgage insurance interest rate is $2.80%. The interest rate is applied to the mortgage balance:
- $595,000 x 0.0280 = $16,660
- Your total mortgage insurance cost will be $16,660
- Note: You’ll also be charged provincial sales tax (PST) if you live in Ontario, Quebec or Saskatchewan