Q If I Choose to Build an Energy Efficient Home with ICF (Insulated Concrete Form) Foundation, do I save on my Mortgage?

A Yes, Canada Mortgage and Housing Corporation (CMHC) recognizes the advantages of building energy efficient and you receive immediate discounts up front for building a home which qualifies under the CMHC Energy Efficient Home guidelines. The upfront discount is a 10% reduction on your CMCH default insurance premium and you do not pay an additional premium for
amortizations over 25 years.

The following illustration demonstrates the potential of this upfront savings on a 250,000 purchase price.

For illustration purposes we will assume a 35 year amortization and an interest rate of 5%. We will also assume you apply your
10% discount to your mortgage principal.

Energy Efficient Home 
Net Mortgage Amount 
CMCH Premium 
Total Mortgage Amount 
Potential Long Term Savings

No

$ 237,500.00

$     7,481.25

$ 244,981.25

$           0.00

Yes

$ 237,500.00

$      5,878.13

$ 243,378.13

$     3,376.80

A On October 15th, 2008 the federal government issued new guidelines which financial institutions are to adhere to when issuing high ratio mortgages that have default mortgage insurance. In Canada a high ratio mortgage is a mortgage in which the borrowed amount exceeds 80% of the property value and/or purchase price. In order for a customer to obtain a high ratio mortgage they must also obtain mortgage default insurance which insures the bank against default by the customer.
 

The new regulations put forth by the federal government on October 15th, 2008 include but are not limited to the following key points.

• Reduction in maximum amortization from 40 years to 35 years.

• Minimum down payment requirement increased from 0% to 5%.

Let’s look at what each of these key points mean in dollars and cents.

• If you were to borrow 100,000 to purchase a home and chose a 35 year amortization your payment would be approximately 25 dollars more per month compared to a 40 year amortization.

• Prior to October 15th, 2008 if your beacon score exceeded 680 you were not required to have any down payment. Today, at least 5% or 5000 per 100,000 of is required as a down payment.

The result of these new guidelines does not mean that you must save 5% in order to purchase a home and the section “Do I Need to Save 5% to Purchase a Home?” sheds light on some ways to still obtain a mortgage without a down payment.

A Although the federal government has stipulated that a 5% minimum down payment is required as of October 15th, 2008 there are options when it comes to obtaining that 5% down. If you cannot save the 5% you can use a non-traditional source of down payment provided your beacon score exceeds 650.

Canada Mortgage and Housing Corporation (CMCH) defines a non-traditional source of down payment as follows:  “Any source that is arm’s length to and not tied to the purchase or sale of the property such as borrowed funds, gifts, 100% sweat equity and lender cash back incentives.”

Whether you decide on a traditional or non-traditional source of down payment our Mortgage Expert will sit with you to discuss which option is best for you.

Q What is a mortgage broker and re there benefits of using your mortgage broker?

A A mortgage broker has access to many competing lending institutions, including banks, insurance companies, pension funds, trust companies and even private individuals. Since mortgage brokers do not have to sell the products of any one lender, they can be completely unbiased in recommending a mortgage that has the most attractive rate and features for their clients.

Home buyers and homeowners will save time and money by enlisting the services of a broker.