A house is appraised at $298 000 and you have a down payment of $25 000. CMHC charges the following rates: Up to and including 80 percent, 1.00 percent; up to 85 percent, 1.75 percent; up to 90 percent, 2.00 percent; up to 95 percent 2.75 percent. What will be the approximate total amount of the mortgage?

Question

Quizplus · Accepted Answer

First, we need to calculate the maximum amount we can get as a mortgage.

We take 95% of $298 000:

0.95 x $298 000 = $283 100

This is the maximum mortgage amount we can get.

Next, we need to calculate the CMHC insurance premium.

Since our down payment is less than 20% of the appraised value, we need to use the rates for up to 95% financing.

We take the maximum mortgage amount ($283 100) and subtract our down payment ($25 000):

$283 100 - $25 000 = $258 100

Now we can use the CMHC rates to calculate the insurance premium:

1% on the first $90 000 = $900 
1.75% on the next $45 000 = $787.50 
2% on the next $58 100 = $1 162 
Total CMHC insurance premium = $2 849.50

Finally, we add the mortgage amount and the insurance premium to get the total mortgage:

$258 100 + $2 849.50 = $260 949.50

Rounded to the nearest dollar, the approximate total amount of the mortgage is $280 508, so the answer is D.

A House Is Appraised at $298 000 and You Have