CMHC Insurance

Learn what CMHC Insurance is, when it's required in Canadian real estate, how much it costs, and how it affects homebuyers with low down payments.

CMHC Insurance



What is CMHC Insurance?

CMHC Insurance, also known as mortgage loan insurance, is a government-backed insurance policy provided by the Canada Mortgage and Housing Corporation (CMHC) that protects lenders in case a borrower defaults on a high-ratio mortgage.

Why CMHC Insurance Matters in Real Estate

In Canada, homebuyers who make a down payment of less than 20% are required by law to obtain mortgage loan insurance from CMHC or another approved provider. This insurance protects the lender — not the borrower — by covering losses in the event of mortgage default.

While it doesn’t benefit the buyer directly, CMHC Insurance enables them to purchase a home with as little as 5% down, which is crucial in high-priced housing markets. It helps stabilize the housing market and reduces risk for lenders, making mortgages more accessible to Canadians with lower savings.

The cost of CMHC Insurance is based on a sliding scale tied to the loan-to-value ratio and is typically added to the mortgage principal or paid as a lump sum. Premiums range from 2.8% to 4% of the mortgage amount, depending on the size of the down payment.

Understanding CMHC Insurance is key for budgeting, especially for first-time homebuyers, and for making informed decisions about down payment strategy and overall affordability.

Example of CMHC Insurance

A buyer in Ontario purchases a $500,000 home with a 10% down payment. Since this is less than 20%, they must pay a CMHC Insurance premium of $13,950, which is added to their mortgage.

Key Takeaways

  • Required for down payments under 20%.
  • Protects the lender in case of borrower default.
  • Provided by CMHC and other approved insurers.
  • Cost is based on mortgage size and down payment.
  • Enables access to homeownership with smaller savings.

Related Terms

Additional Terms

Rent Control

Rent control refers to government regulations that limit how much landlords can increase rent for residential tenants each year.. more

Receivership

Receivership is a legal process where a court or secured creditor appoints a receiver to take control of a borrower’s assets, such as property or. more

REALTOR

A REALTOR is a licensed real estate professional who is a member of the Canadian Real Estate Association (CREA) and adheres to its Code of Ethics and. more

Property Use History

Property use history refers to the documented past uses, functions, and occupancy of a property, which may affect environmental risk, zoning, or. more

Property Management

Property management is the oversight and administration of real estate assets on behalf of the owner, covering leasing, maintenance, financial. more

Property Maintenance

Property maintenance refers to the ongoing upkeep, repair, and management of a building or land to preserve its safety, functionality, and appearance.. more

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