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CMHC FINANCING - ALL YOU WANTED TO SHOULD KNOW

What is CMHC Mortgage Loan Insurance?

Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20%of the purchase price. Mortgage loan insurance helps protects lenders against mortgage default, and enables consumers to purchase homes withas little as 5%down payment-with interest rates comparable to those with a 20%down payment.

To obtain mortgage loan insurance, lenders pay aninsurance premium. Typically, your lender will pass this cost on to you. The premium payable is based on a percentage of the home's purchase price that is financed by a mortgage. The premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments.B

Mortgage loan insurance is not to be confused with mortgage life insurance which guarantees that your remaining mortgage at the time of your death will not be a burden to your estate.

Who Needs Mortgage Loan Insurance?

Typically, lenders require mortgage loan insurance for loans made to anyone that wishes to purchase a home with less than 20% of the purchase price. The Canadian Bank Act prohibits most federally regulated lending institutions from providing mortgages without mortgage loan insurance for amounts that exceed 80% of the value of the home or purchases with less than 20% down payment.

Through your lender, CMHC Mortgage Loan Insurance enables you to finance up to 95% of the purchase price of a home.

 

 

Use our mortgage calculator to help calculate the maximum house price you can likely afford, the maximum mortgage amount you can likely borrow, and your likely monthly mortgage payments (principal + interest). To learn more about the process of buying a home, see Home buying Step by Step. It can take the confusion out of the home buying process by helping you understand the various aspects to buying the home you really want.

What are the General Requirements to Qualify for Homeowner Mortgage Loan Insurance?

The home is located in Canada.

You will typically have a down payment of at least 5% of the purchase price of the dwelling, depending on the dwelling type.

Single-family and two-unit dwellings (5% minimum down payment)

Three- or four-unit dwellings (10% minimum down payment)

Normally, the minimum down payment comes from your own resources. However, a gift of a down payment from an immediate relative is acceptable for dwellings of 1 to 4 units. For eligible borrowers, additional sources of down payment, such as lender incentives and borrowed funds, are also permitted. Check with your lender for qualifying criteria and availability.

Your total monthly housing costs, including Principal, Interest, property Taxes, Heating (P.I.T.H.), the annual site lease in the case of leasehold tenure and 50% of applicable condominium fees, shouldn't represent more than 32% of your gross household income (Gross Debt Service (GDS) ratio). Use the GDS form to calculate how much you can afford in housing costs to be eligible.

Your total debt load shouldn't be more than 40% of your gross household income. The Total Debt Service (TDS) ratio is your P.I.T.H. + the annual site lease in the case of leasehold tenure and 50% of condominium fees (if applicable) + payments on all other debt / gross annual household income. Add up your costs and determine your Total Debt Service ratio using the TDS form.

You also need to think about closing costs (for example, legal and land transfer fees) equivalent to 1.5% to 4% of the purchase price. Many first-time buyers are surprised by these costs. That is why, when qualifying for CMHC's Mortgage Loan Insurance, our Home Purchase Cost Estimate worksheet form will help you calculate your total homebuying costs.

Closing costs include but are not limited to one-time items such as lawyer fees, GST and PST as applicable, land transfer tax if applicable, adjustments, etc., to allow you to complete the house purchase.

Other requirements may apply and are subject to change. For details, please contact your lender or mortgage broker

 

How Much Does CMHC Mortgage Loan Insurance Cost?

To obtain CMHC Mortgage Loan Insurance, lenders pay an insurance premium. Typically, your lender will pass these costs on to you.Your lender will give you the exact price when you apply for a mortgage.

The CMHC Mortgage Loan Insurance premium is calculated as a percentage of the loan and is based on the size of your down payment. The higher the percentage of the total house price/value that you borrow, the higher percentage you will pay in insurance premiums.

Remember: without mortgage insurance you may avoid the insurance premium but you'll typically pay much higher interest rates and additional administrative fees. At the end of the day, for the vast majority of borrowers, the cost of CMHC Mortgage Loan Insurance is more than fully offset by the savings achieved.

A 10% premium refund and extended amortization period without surcharge may be available when CMHC Mortgage Loan Insurance is used to finance an Energy-Efficient Homes.

Loan-to-Value

Premium on Total Loan

Premium on Increase to Loan Amount for Portability and Refinance

Standard Premium

Self-Employed without 3rd Party Income Validation

Standard Premium

Self-Employed without 3rd Party Income Validation**

Up to and including 65%

0.50%

0.80%

0.50%

1.50%

Up to and including 75%

0.65%

1.00%

2.25%

2.60%

Up to and including 80%

1.00%

1.64%

2.75%

3.85%

Up to and including 85%

1.75%

2.90%

3.50%

5.50%

Up to and including 90%

2.00%

4.75%

4.25%

7.00%

Up to and including 95%

2.75%

6.00%

4.25%*

*

90.01% to 95% -
Non-Traditional DownPayment***

2.90%

N/A

*

N/A

Extended Amortization Surcharges

Greater than 25 years, up to and including 30 years: 0.20%
Greater than 30 years, up to and including 35 years: 0.40%

For portability and refinance, the premium is the lesser of Premium on Increase to Loan Amount or the Premium on Total Loan Amount. In the case of portability, a premium credit may be available under certain conditions.

* For portability the maximum LTV ratio is 90%, but CMHC may consider higher LTV ratios when the new ratio is equal to or less than the original LTV. For portability, the premium is higher for non-traditional down payments on Increase to Loan Amount.

** For conversion from Self-Employed with traditional 3rd party income validation to Self Employed without traditional 3rd party income validation, the premium is the lesser of: a) the Premium on Total Loan Amount or; b) the outstanding balance multiplied by a 1.5% premium plus the Premium on Increase to Loan Amount.

*** Down Payment Requirements - Traditional sources of down payment include: Applicant's savings, RRSP withdrawal, funds borrowed against proven assets, sweat equity (<50% of min.required equity), land unencumbered, proceeds from sale of another property, non-repayable gift from immediate relative, equity grant (non-repayable grant from federal, provincial or municipal agency). Non-traditional sources of down payment include: 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, lender cash back incentives.

Premiums in Ontario and Quebec are subject to provincial sales tax. The provincial sales tax cannot be added to the loan amount.

 

 

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