Quote:
Originally Posted by EvoFire
What DOES happen when say, you are upside down and you are up for renewal?
I know that to get a mortgage without paying the CMHC insurance, I have to have 20% down. But what if when at renewal it's worth is less than the mortgage + 20%? Would I have to renew and pay the insurance, or any other difficulties? Obviously I have never bought a property before so I would have no idea, but even if it's useless to me now, it's not a useless piece of information.
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It's based on bank's calculation when processing your mortgage application. They factor the CMHC (or actually apply for such insurance) in if needed.
Say your home is 1M (in both price and how bank values it), you put 200k down and carries an 800k mortgage, no CMHC needed from bank viewpoint.
You are up for renewal, your home is now worth 800k (again, both price and how bank values it), and you have paid down say 50k over the course of 5yrs, so you still need to borrow 750k on mortgage, with 800k in equity. From bank's perspective, it means that now you only have 6.25% of assets/down payment/equity in this mortgage (50/800). So, they could potentially qualify you for a renewal, assuming you still pass their test, but they would apply CMHC as your equity no longer satisfy the condition to go without CMHC.