What is CMHC?
The Canada Mortgage and Housing Corporation (also known as CMHC) is a corporation created by the Canadian government in 1944 as part of an effort to support housing for low income families, veterans and all Canadians. The mission of the CMHC is to improve housing quality, choice and affordability for all Canadians, according to the CMHC web site. This insurance is not the type that guarantees that a mortgage will be paid off in the event of a homeowner’s death.
Functions of CMHC
The CMHC manages the federal Mortgage Insurance Fund and sells insurance to Canada’s residential mortgage lenders. Lenders purchase this insurance to protect the financial institutions from situations of mortgage default. This mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price.
CMHC insurance also enables Canadian consumers to purchase a house with a down payment of only 5% and offers interest rates that are similar to (or sometimes even lower than) those with a 20% down payment. According to the CMHC web site, borrowers may be able to finance up to 95% of the purchase price of a new home. CMHC mortgage insurance is extremely helpful because it’ll help to lower both interest rates and administrative fees.
Specifics of CMHC Mortgage Insurance
Lenders must pay a premium for this insurance and it is a cost that is passed on to you, the potential home buyer. The premium is based on the amount of the home price that is financed through a mortgage. There are two ways that homeowners can pay for this insurance premium, as a one-time lump sum payment, or as a monthly payment that is included in the mortgage
The insurance premium depends on how much you’re giving as a down payment and how much of the purchase is borrowed. The CMHC shows the premium on a loan of 65% value is .60%, while the premium on the total loan up to and including 85% is as much as 1.25%.
If a homeowner is using this insurance to finance an energy efficient home, they may qualify for a 10% refund on their mortgage insurance premium. In certain cases, mortgage borrowers may be able to port the insurance from one property to another.
Mortgage Insurance Options through CMHC
CMHC limits the purchase price of a home financed with their mortgage insurance to a maximum of $1,000,000, and it is not limited to single family residential dwellings.
The CMHC offers a wide variety of mortgage and insurance options to assist Canadians achieve their goals of home ownership. The various products offer assistance for those who are new to Canada, those who are self-employed and those who are looking to make home improvements, and more. Available mortgage products include:
- CMHC Purchase
- CMHC Portability
- CMHC Refinance
- CMHC Improvement
- CMHC Newcomer
- CMHC Green Home
- CMHC Income Property
- CMHC Self-Employed
- CMHC Chattel Insurance
The corporation also provides information on the housing market across the country, buying and renting homes or even staying in one’s home as they age.