In Canada today, most homeowners with a mortgage must pay CMHC mortgage rates. This is the best place online to get the information you need to know about mortgage insurance. In this guide, you will find out all the basics about these rates, and you can then apply for an insured loan when you visit the Canadian mortgage rates page on our site.
Traditionally, lenders in Canada have wanted to see borrowers place a twenty percent down payment on their home when they buy a residence. Placing that much down helps assure lenders that they are making a sound choice when they extend a loan and will get back all the money they have loaned plus interest. However, not everyone can put twenty percent down on their mortgage. This used to mean that many people could not get a loan, leaving people to wait decades or longer before they could enjoy home ownership.
In order to address this issue and help people get into homes sooner rather than later, the Canadian government introduced mortgage default insurance just after World War II. Mortgage insurance is a product that covers the losses of banks in case homeowners default, and it is designed for home buyers who can put at least five percent down on their home loan but cannot meet the preferred down payment of twenty percent. The Canada Mortgage and Housing Corporation (CMHC), which is the government-owned housing agency in Canada, insures the vast majority of insured mortgages in Canada. However, Genworth Financial and Canada Guaranty also offer mortgage insurance in Canada. In any case, since most home buyers get mortgage insurance from CMHC, we will focus on this insurer.
Lenders pay a CMHC mortgage insurance premium to enjoy this protection, and they typically pass on the cost to home buyers for whom insurance must be obtained. In most cases, banks add the CMHC premium to your loan principal and amortize the premium over the entire life of your loan. You are certainly allowed, however, to bring money to your loan closing to pay for your CMHC premium. Sometimes, lenders will run special promotions in which they promise to pay your CMHC insurance premium for you. In such cases, however, you should know that you often pay a higher interest rate or have to deal with other mortgage fees that are not charged if you pay the normal CMHC premiums.
Your lender will require CMHC insurance for your mortgage if you can put more than five but less than twenty percent down on your home. A down payment of less than five percent makes you ineligible for mortgage insurance and, therefore, unlikely to qualify for a loan.
The rates you will pay for mortgage insurance from CMHC are calculated by multiplying your home loan by a certain percentage. In turn, this percentage is determined by the amount of your down payment. The more you can put down, the lower your mortgage payment will be.
To calculate the premium you will pay for insurance from CMHC, you only need to find the percentage rate in the lists above that coincides with the amount you have put down on your home purchase. Then, take that percentage and multiply it by your loan principal (home purchase price less the amount you put down). That will give you the total premium that will be added to your mortgage balance.
For example, a mortgage with an amortization of twenty-five years and a 13 percent down payment has an insurance premium of 1.75 percent if the buyer is not self-employed. If your loan principal is $200,000 after your down payment, you will be charged $3,500 for your mortgage insurance. You can also use our CMHC mortgage calculator to quickly and easily calculate the amount of CMHC mortgage insurance you will have to pay.
Since CMHC insurance premiums are based on your total loan principal, the best way to reduce your premium rates is to lower your loan principal through a larger down payment. Put more down on your home, and your insurance costs over time will be more reasonable.
Finally, note that as of July 2012, you cannot get CMHC insurance on loans with an amortization period of greater than twenty-five years.
The following represents the percentages you can expect to pay for mortgage insurance (see step 3 in the preceding section):
TRADITIONAL DOWN PAYMENT
Amortization Period of 26–30 Years
• 5 percent to 9.99 percent down — 2.95% mortgage insurance premium
• 10 percent to 14.99 percent down — 2.20% mortgage insurance premium
• 15 percent to 19.99 percent down — 1.95% mortgage insurance premium
Amortization Period of 25 Years or Less
• 5 percent to 9.99 percent down — 2.75% mortgage insurance premium
• 10 percent to 14.99 percent down — 2% mortgage insurance premium
• 15 percent to 19.99 percent down — 1.75% mortgage insurance premium
NON-TRADITIONAL DOWN PAYMENT
Amortization Period of 26–30 Years
• 5 percent to 9.99 percent down — mortgage insurance not possible
• 10 percent to 14.99 percent down — 4.95% mortgage insurance premium
• 15 percent to 19.99 percent down — 3.1% mortgage insurance premium
Amortization Period of 25 Years or Less
• 5 percent to 9.99 percent down — mortgage insurance not possible
• 10 percent to 14.99 percent down — 4.75% mortgage insurance premium
• 15 percent to 19.99 percent down — 2.9% mortgage insurance premium
SELF-EMPLOYED WITH NON-VERIFIED INCOME
Amortization Period of 26–30 Years
• 5 percent to 9.99 percent down — 4.75% mortgage insurance premium
• 10 percent to 14.99 percent down — 2.9% mortgage insurance premium
• 15 percent to 19.99 percent down — 1.64% mortgage insurance premium
Amortization Period of 25 Years or Less
• 5 percent to 9.99 percent down — 4.75% mortgage insurance premium
• 10 percent to 14.99 percent down — 2.9% mortgage insurance premium
• 15 percent to 19.99 percent down — 1.64% mortgage insurance premium
One of the major choices you will make when buying a home is whether to wait until you have a 20 percent down payment saved or to buy a home before you reach that threshold. The main advantage of buying before you have 20 percent saved, of course, is that you get into a home sooner rather than later. On the other hand, the main disadvantage is that if you buy a home before you can put 20 percent down, you will pay extra in the form of CMHC insurance premiums.
All things being equal, you should pay for mortgage insurance and buy before you save up a twenty percent down payment if:
• you need housing right away
• you expect housing prices to rise dramatically in the near future and price you out of the market entirely
• you prefer living in your own home over your current living arrangements
On the other hand, all things being equal, you should save up a down payment of 20 percent if:
• you are in no rush to get into a home
• you want to save the most money on your loan
• housing prices are fairly stable and unlikely to price you out of the market over the next few years.
Now that you have a better grasp of CMHC mortgage insurance products, you can figure out your CMHC premium using the handy mortgage insurance calculator on our site. You can also visit the mortgage rates page to apply for a loan directly from a lender.
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