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What is CMHC insurance?

May 16 2017 by Multi-Prêts Hypothèques
What you'll learn
  • What is the CMHC?
  • How the premium is calculated
  • How to pre-qualify

Since its creation, the CMHC has been a Crown corporation whose mission is to contribute to the stability of the housing market. One of the ways they do so is through their mortgage loan insurance that provides Canadians with greater access to property. Indeed, it allows them to borrow to buy a home while providing a lower down payment than banks would usually require.

The government requires lenders to insure all loans with down payments of less than 20%. The loan can be insured by the Canada Mortgage and Housing Corporation, Genworth or Canada Guaranty. The premium is determined by a percentage that varies according to the value of the loan in regards to the purchase price. In other words, the higher the down payment, the lower the premium. 

Premium calculations

To get a sense of what that amount can look like on a mortgage, use our Mortgage Payment Calculator. Fill in the basic data concerning the mortgage loan you are aiming for, and you’ll get the CMHC insurance premium that goes with it. This is not to be confused with home insurance, which you will still need to get on your end (to insure against fire, at the very least).

This insurance is considered to be beneficial to the buyer’s market, as it allows for lower mortgage rates. This is because the risk of defaulting on a loan is minimized from the bank’s perspective, as it is spread out among an array of borrowers.

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Tools to become a homeowner

Incidentally, if you are thinking of becoming a homeowner, find out more about our Online Mortgage Pre-qualification Tool or consult our guide

Note that the lenders are the ones who pay the mortgage insurance premium, which they get you to reimburse by adding it to your mortgage. Another good thing to know is that in Quebec, Ontario and Manitoba, the provincial sales tax is added to your CMHC insurance premium. This tax must be paid by the buyer when visiting the notary.

Lastly, don’t let the new mortgage regulations discourage you from wanting to become a homeowner. To find out more, read our article “Who is affected by these new rules?”

Your Multi-Prêts broker can guide you through your projects

Key takeaways
  • The CMHC is a Crown corporation whose mission is to contribute to the stability of the housing market.
  • The government requires lenders to insure all loans with a down payment of less than 20%, and the loan can be insured by the CMHC, Genworth or Canada Guaranty.
  • To get a sense of what that amount can look like on a mortgage, use our Mortgage Payment Calculator.  
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