If you want to buy a home with a down payment of less than 20%, you’ll need mortgage default insurance. This protects your lender in case you can’t make your payments.
Benefits of mortgage loan insurance
CMHC mortgage loan insurance lets you get a mortgage for up to 95% of the purchase price of a home. It also ensures you get a reasonable interest rate, even with your smaller down payment.
Mortgage insurance helps stabilize the housing market, too. During economic slumps when down payments may be harder to save, it ensures the availability of mortgage funding.
Minimum down payment
To get mortgage loan insurance, you’ll need a minimum down payment. The amount depends on the home’s purchase price:
- If the home costs $500,000 or less, you’ll need a minimum down payment of 5%.
- If the home costs more than $500,000, you’ll need a minimum of 5% down on the first $500,000 and 10% on the remainder.
- If the home costs $1,000,000 or more, mortgage loan insurance is not available.
Your lender pays an insurance premium on the loan insurance. It’s calculated as a percentage of the mortgage and is based on the size of your down payment. Your lender will likely pass this cost on to you. You can pay it in a lump sum or add it to your mortgage and include it in your payments.
To obtain CMHC Mortgage Loan Insurance, lenders pay an insurance premium. Typically, your lender will pass these costs on to you. Your lender will give you the exact price when you apply for a mortgage.
The CMHC premium is calculated as a percentage of the loan and is based on the size of your down payment. The higher the percentage of the total house price/value that you borrow, the higher percentage you will pay in insurance premiums. For the vast majority of borrowers, the cost of mortgage insurance is more than fully offset by the savings achieved.
Up to 25% premium refund may be available when CMHC insurance is used to finance an Energy-Efficient Home.
Questions about mortgage loan insurance? Contact one of our sales representatives for more information.