CMHC Insurance
Definition and meaning of CMHC Insurance in real estate.
CMHC insurance is mortgage default insurance provided by the Canada Mortgage and Housing Corporation, a crown corporation that protects lenders against borrower default. In Canada, this insurance is mandatory for homebuyers who purchase a home with a down payment of less than twenty percent of the purchase price.
In more detail
While the borrower pays the premium for this insurance, it directly protects the lender rather than the homeowner. The premium is calculated as a percentage of the loan amount and is typically added to the mortgage balance to be paid over the life of the loan.
This insurance enables lenders to offer competitive interest rates to borrowers who might otherwise be considered high risk due to their low down payments. Homebuyers must meet specific credit and income requirements set by the corporation to qualify for a government backed mortgage.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Required by | Canadian federal regulation for down payments under twenty percent |
| Who pays | The homebuyer, though the coverage protects the lender |
| Applies to | Residential properties in Canada |
A Canadian buyer purchasing a home with a ten percent down payment pays a premium for CMHC insurance, which is added to their monthly mortgage payment.
Frequently asked questions
Can I avoid paying CMHC insurance?
You can avoid this insurance by making a down payment of twenty percent or more of the purchase price of the home.
Is CMHC insurance available for expensive homes?
No, CMHC insurance is not available for properties with a purchase price of one million Canadian dollars or more, which requires a minimum down payment of twenty percent.