Without Mortgage Insurance The Canadian Real Estate Market Would Fail. Period.  You May Not Like Paying It, And If You Don’t, Save More Money.

So What Is CMHC?….

CMHC is an acronym for the Canada Mortgage and Housing Corporation.  Basically, CMHC is a federally run government agency that provides mortgage default insurance to banks in Canada to protect THEM from loss.

If you purchase a home with less than a 20% down payment you will require mortgage insurance.  This type of mortgage is called a “high ratio mortgage.”  If your down payment is 20% or more of the purchase price of your home, you will not require mortgage insurance.  This type of mortgage is called a “conventional mortgage.”  Your initial percentage of down payment determines your mortgage insurance premium, if any, and can be referred to as loan to value (LTV).

Your mortgage insurance premium is based on the “riskieness” of your mortgage application.  In the banks eyes, the less of your own money used as a down payment the higher risk you are of mortgage default.  If you put zero or five percent as your down payment, you could theoretically walk away from your home and mortgage, with minimal financial exposure (your credit with be destroyed, mind you, but I digress).  If you have reduced financial exposure, and little of your own resources invested, the lenders need mortgage insurance to protect them from YOUR potential default.  Enter Canada Mortgage Housing Corporation or CMHC.

When applying for a “high ratio” mortgage, a insurance premium will be added back or capitalized into your original mortgage amount.  Click here for our ebook which explains “what is CMHC”, mortgage insurance premium amounts and amortization.  The larger your down payment, the lower your CMHC insurance premium will be (less risk).  The less money used as your down payment, the higher your CMHC insurance premium will be (higher risk).

Did you know there are private mortgage insurers that compete with Canada Mortgage and Housing Corporation (CMHC)?

Be sure to register for our free video series “There Is Money In Your Mortgage.”  Only do so if you love FREE information and HUGE value.

Cheers,

Chad

403-809-5447