CIBC is one of the largest banks in Canada, which is why you probably have many family members and friends who have a mortgage through this lender. If you ask any of them whether you should get a mortgage through CIBC, you’ll probably hear good stories about the bank’s products and services.
But there are other important factors to consider when choosing a lender: Whether its interest rates are competitive and your payment options.
Let’s look at the specifics of getting a mortgage with CIBC.
The down payment
When you apply for a mortgage with CIBC, or with any lender in Canada, you pay a percentage of the home’s purchase price with your own money as a down payment. The minimum required size depends on the purchase price of the home and is set out by the federal government, meaning it’s the same from lender to lender.
Here’s how to tell how big your down payment must be, depending on the purchase price:
- For the portion of the home’s purchase price that’s less than $500,000, the minimum down payment is 5%.
- For the portion of the home’s purchase price that’s between $500,000 and $999,999.99, the minimum down payment is 10%.
- If the home’s purchase price $1 million or more, the minimum down payment is 20%.
As you can see above, if your home’s purchase price is between $500,000 and $999,999.99, your minimum down payment will be between 5% and 10%. To estimate your minimum down payment depending on your home’s purchase price, you can use RateHub.ca’s mortgage affordability calculator.
Read: The Pros and Cons of Buying a Fixer-upper
Mortgage default insurance
Sometimes also called CMHC insurance, mortgage default insurance protects the lender in case you can’t make your mortgage payments. It’s required by law on all mortgages with a down payment less than 20%. The biggest seller of mortgage default insurance is the Canada Mortgage and Housing Corporation (CMHC). When you buy mortgage default insurance, you’re charged a premium, which is calculated as a percentage of your home’s purchase price. The premium will typically be several thousand dollars, but you don’t have to pay it up-front. Instead, it will be added to your mortgage principal, and you pay it back over time. Here’s a guide to how much your mortgage default insurance premiums will be depending on your down payment:
- If your down payment is between 5% and 9.99%, your premium is 4% of the purchase price
- If your down payment is between 10% and 14.99%, your premium is 3.1% of the purchase price.
- If your down payment is between 15% and 19.99%, your premium is 2.8% of the purchase price.
Because mortgage default insurance is added to your mortgage balance, it will increase your regular mortgage payment. To determine how this insurance will affect your mortgage payment, you can use RateHub.ca’s mortgage payment calculator. Try adjusting the size of your down payment to see how it affects your monthly mortgage payment.
Your mortgage’s amortization period is the total length of time that you’ll have your mortgage (the most common one is 25 years). If you choose a longer amortization period, your regular mortgage payment will be smaller, but you’ll pay more interest over the life of the loan. Choosing a shorter amortization period could save you thousands or tens of thousands of dollars in interest over the life of your mortgage.
The mortgage term is the specific period that you agree to pay a defined mortgage interest rate to your lender. CIBC offers terms as short as six months to as long as 10 years. The length of term you choose depends on your unique circumstances. If you think you might need to move or sell your property soon, you can pick a shorter term to avoid the hefty penalties you’ll incur if you break your mortgage early. If you want a predictable mortgage payment for a long period, choosing a longer mortgage term will give you stability. Generally speaking, shorter mortgage terms will offer lower rates and longer mortgage terms offer higher rates.
Your payment frequency is how often you make a mortgage payment. Just like many other lenders, CIBC offers weekly, biweekly, semi-monthly, or monthly mortgage payments. By making more frequent payments, you can become mortgage-free sooner.
If paying your mortgage down ahead of schedule is important to you, you should choose a lender that offers generous prepayment privileges. Prepayment privileges are extra payments you can make on your mortgage to pay it down and become mortgage-free sooner. CIBC offers two main types of prepayment privileges. The first prepayment privilege is a payment top up. With a CIBC mortgage, you can double up on your mortgage payment once per calendar year. Alternatively, if you have a larger sum of cash you want to put towards your mortgage, you can pay down 10% (or 20% in some cases) of the original principal mortgage amount every calendar year.
Finally, there’s your mortgage rate to consider. Your mortgage rate is the interest rate you’ll pay for the loan term. For example, if you choose a five-year fixed mortgage rate at 2.5%, you’ll pay 2.5% interest on your mortgage for the whole five years, unless you choose to break your mortgage term early.
Most banks offer what they call “posted rates,” which aren’t the best rates available. To obtain the absolute best rate, you must negotiate. Even a few tenths of a percentage point can make a huge difference in the amount of interest you pay so it’s important that you negotiate with the bank yourself or through a mortgage broker to ensure you get the best mortgage rates possible.
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