Canada Mortgage Housing Corporation

Canada Mortgage and Housing Corporation (CMHC) is a Canada Government Crown Corporation which can provide insurance coverage on your mortgage in case of default.

That is if you can no longer service your mortgage and the lender incurred a loss as a result, Canada Mortgage and Housing Corporation will compensate the lender for the loss.

Canada Mortgage and Housing Corporation assists potential home buyers to purchase a home with little or no down payment sooner because you do not have to save for a downpayment.

Why do I need to buy mortgage insurance!

If you are borrowing 80% or less of the value of a property, you do not need to buy Canada Mortgage and Housing Corporation insurance.

If you are borrowing more than 80% (referred as High Ratio Mortgage), you must buy insurance coverage from a mortgage insurance company before any financial institution will lend you the money.

Canada Mortgage and Housing Corporation will provide insurance coverage, subject to borrowers meeting certain criteria, up to 100% of the value of a property.

Borrowers pay a premium ranging from 0.5% to 3.10% of the mortgage amount, depending on the loan to value ratio. The higher the ratio the higher is the premium.

There used to be a limit on the value of the property if it needs mortgage insurance. This requirement has now been eliminated and you can purchase a property of any value for mortgage insurance purposes.

Imagine what the premium will be on a $400,000.00 mortgage at maximum 3.1%. That's a cool $12,400.00. If you do not have the cash, the premium may be added to the mortgage amount and repayment spread over the amortization period chosen.

Genworth Financial Mortgage Insurance Company of Canada is a public company that can also provide default insurance coverage for high ratio mortgage.

For new mortgage the maximum amortization period is 25 years. Recently Canada Mortgage and Housing Corporation has extended the amortization period to 30 and 35 years at an additional premium of 0.25%. Genworth Financial Canada is offering a 30 year mortgage at a 0.2% premium and a 35 year mortgage at a 0.5% premium. The effect of a longer amortization period is that the monthly mortgage payment is reduced to a more affordable level for many borrowers.

Please note that you do not need to get in touch with CMHC or Genworth to apply for a mortgage insurance. Your mortgage broker or bank mortgage officer will apply on your behalf.

What is my chances of getting mortgage insurance?

If you have a good and proven track record, a good steady job, your income is sufficient to service your monthly mortgage payment and other debts, you have a good chance of getting approved.