The Cost of Home Ownership
You found your dream home and you've concluded you can easily afford it. But what other costs should you be aware that could influence your purchase decision. Is your mortgage more than 80% of the value of the property? If so, you'll need mortgage loan insurance. What are the closing costs? And, what are the ongoing costs that will impact your budget once you become a home owner?
1. Mortgage Loan Insurance:
With the availability of mortgage loan insurance, more Canadians can realize their dreams of home ownership.
There are two types of mortgages which are determined by the amount of your down payment in relation to the purchase price. Should you have 20% or more as a down payment, you will have a conventional mortgage. Should you have less than 20%, you will have a high ratio mortgage, which will require mortgage loan insurance. If mortgage loan insurance is required, ING DIRECT will arrange for its purchase on your behalf.
Mortgage Loan Insurance is provided by the Canada Mortgage and Housing Corporation (CMHC) and Genworth Financial Canada. Like any other kind of insurance, a premium must be paid for the insurance coverage. This premium can be paid up front in a lump sum or added to your mortgage amount. The majority of mortgage borrowers have it included in their mortgage amount.
Premiums are based on the amount of the mortgage in relation to the value of the home. The greater the down payment, the lower the premium. And if your down payment is greater than 20% of the purchase price, mortgage insurance may not be required.
| Mortgage amount (% of home value) | 80.01 - 85% | 85.01 - 90% | 90.01 - 95% | 95.01 - 100% |
| Premium charged (25 year amortization) * | 1.75% | 2.00% | 2.75% | 3.10% |
| Premium charged (30 year amortization) * | 1.95% | 2.20% | 2.95% | 3.30% |
| Premium charged (35 year amortization) * | 2.15% | 2.40% | 3.15% | 3.50% |
| Premium charged (40 year amortization) * | 2.35% | 2.60% | 3.35% | 3.70% |
* premium charged is equal to a pre-determined percentage of the mortgage amount.
For example, on a home purchased for $200,000, with down payments between 5% and 20%, the amount of mortgage loan insurance premiums added to the mortgage amount would be as follows:
| Down payment (%) | 5% | 10% | 15% | 20% |
| House value | $200,000 | $200,000 | $200,000 | $200,000 |
| Down payment ($) | $10,000 | $20,000 | $30,000 | $40,000 |
| Mortgage amount ($) | $190,000 | $180,000 | $170,000 | $160,000 |
| Amortization period | 25 years | 25 years | 25 years | 25 years |
| Insurance premium | 2.75% | 2.00% | 1.75% | 0%* |
| Insurance premium ($) | $5225 | $3600 | $2975 | $0 * |
| Total mortgage amount (including insurance) | $195,225 | $183,600 | $172,975 | $160,000 * |
*Mortgage Loan Insurance may be required for some property types. You will be advised if insurance is required when your mortgage application is approved.
Here's a handy tool to help calculate the potential cost of Mortgage Loan Insurance for the home you are considering.
Purchase Price $___________
| Down payment (%) | 5% | 10% | 15% | 20% |
| House value ($) | $ | $ | $ | $ |
| Down payment ($) | $ | $ | $ | $ |
| Mortgage amount ($) | $ | $ | $ | $ |
| Amortization period | 25 years | 25 years | 25 years | 25 years |
| Insurance premium | 2.75% | 2.00% | 1.75% | 0% * |
| Insurance premium ($) | $ | $ | $ | $0* |
| Total mortgage amount (including insurance) | $ | $ | $ | $ |
| Amortization period | 30 years | 30 years | 30 years | 30 years |
| Insurance premium | 2.95% | 2.20% | 1.95% | 0% * |
| Insurance premium ($) | $ | $ | $ | $0* |
| Total mortgage amount (including insurance) | $ | $ | $ | $ |
| Amortization period | 40 years | 40 years | 40 years | 40 years |
| Insurance premium | 3.35% | 2.60% | 2.35% | 0% * |
| Insurance premium ($) | $ | $ | $ | $0* |
| Total mortgage amount (including insurance) | $ | $ | $ | $ |
2. One-time costs to consider:
| Legal fees | $________ |
| Land transfer tax | $________ |
| Adjustments (for example, utilities, taxes) | $________ |
| Appraisal fees | $________ |
| Home inspection fees | $________ |
| Home insurance | $________ |
| Survey or title insurance | $________ |
| Moving costs | $________ |
| Estimated total one-time costs | $________ |
3. Recurring costs to consider:
| Mortgage payment | $________ |
| Property taxes | $________ |
| Property insurance | $________ |
| Condo fees | $________ |
| School taxes | $________ |
| Electricity (hydro) | $________ |
| Heating (gas) | $________ |
| Telephone and cable | $________ |
| Estimated total monthly recurring | $________ |
