How much does the CMHC fee really cost?

Edited by Admin
Hello Bram, 
I have a question regarding the CMHC fee:
My fiancee and I are currently in the market for a home as first time buyers, and we are having discussions about which option is better for us: (hypothetical numbers)
Property #1: Condo value of $400,000 with $80,000 down payment - no CMHC fee. 
Property #2: Freehold Townhouse value of $800,000 with $80,000 down payment - 3.10% CMHC fee. 
Let's assume we get approved for either mortgage, and the neighborhoods of the properties are within the same municipality, what advice would you provide in this scenario? 
Thank you in advance for your help!


By Bram Sandow
This is a great question and not an easy one to answer. If you can avoid paying CMHC I think that is always a good thing as by taking CMHC you are paying insurance for the lender, not for yourself. We must ask though, what is CMHC? 
The Canada Mortgage and Housing Corporation (CMHC) exists to assist buyers in purchasing a home they otherwise would not be able to afford due to what lenders would consider to be an insufficient down payment. In today's market the average home price in Toronto is $916,567. To purchase a home at this price and avoid paying mortgage insurance you would need to have $183,315, and of course the income to support a mortgage of $733,255.
So does this make sense? Maybe, it all depends on you and your individual needs and circumstances. I always discuss with my clients affordability as I believe it is crucial to not only be able to pay the mortgage but also have some spending money for incidentals that crop up as well as for some fun.
Coming back to your examples, I have to ask if the condominium would suit your needs or not. If you and your fiancee would be happy in a condo then it's a very worth while option. You would have more equity in the property, lower mortgage payments and given the scenario more cash at your disposal for savings and other investments.
On the other hand, if you and your fiancee intend to start a family and will need more space as well as a backyard AND can afford the $800,000 townhouse then that may be the better option. 
Ultimately you're going to have to weigh your needs, your wants and future plans to make the right decision. Either way, I don't think CMHC is a bad thing. Yes you pay for the insurance, but adding $22,000 to a $720,000 mortgage, amortized over 20-30 years is not likely going to make or break your ability to pay the monthly payments.
The important take a way is to purchase the right property for you, that you can afford.
I hope my answer is helpful, please feel free to call me should you wish to discuss further.