Question

1. Sean and Lilly are looking to purchase their first home together in Montréal and were thrilled when they heard that their offer of $295,000 was accepted. It was only when they calculated some other amounts that were needed that panic set in. As they only have 5% as a down payment, they are required to purchase mortgage loan insurance from the Canada Mortgage and Housing Corporation (CMHC) at 4% of the mortgage. In addition, they need to pay Transfer Duties (also called “Welcome Tax”). As they barely scrapped enough money for the down payment, they do no know how they will come up with these amounts. How much is the total needed to cover their transfer duties under the city of Montréal and CMHC mortgage loan insurance? (Note they have decided to pay the loan insurance as a lump sum versus adding it to their mortgage payments).

Answer 1

Price of home = $295,000

Down payment = 5% of price of home = 5% of 295,000 = $14,750

Mortgage value = Price of home - Down payment = $295,000 - $14,750 = $280,250

CMHC insurance rate = 4%

CMHC insurance premium = 4% of mortgage value = 4% of $280,250 = $11,210

Transfer duties is calculated for the purchase price and under city of Montreal they are

• 0.5% on values less than $51,700
• 1.0% on values from $51,700 to $258,600
• 1.5 % on values from $258,600 to $517,100

Calculation using $295,000 purchase price:

1. Multiply $51,700 by 0.5% = $258.50
2. Then multiply $206,900 (difference of 258,600 and $51,700) by 1.0% = $2,069.00
3. Then multiply $36,400 (difference of 295,000 and 258,600) by 1.5% = $546.00

Transfer duties = $258.50 + $2,069.00 + $546.00 = $2,873.50

Total needed to cover their transfer duties under the city of Montréal and CMHC mortgage loan insurance = Transfer duties + CMHC insurance premium = $2,873.50 + $11,210 = $14,083.50