{"id":24327,"date":"2024-11-05T08:49:00","date_gmt":"2024-11-05T13:49:00","guid":{"rendered":"https:\/\/www.zolo.ca\/blog\/?p=24327"},"modified":"2024-12-20T10:44:55","modified_gmt":"2024-12-20T15:44:55","slug":"cmhc-mortgage-insurance","status":"publish","type":"post","link":"https:\/\/www.zolo.ca\/blog\/cmhc-mortgage-insurance","title":{"rendered":"CMHC Mortgage Insurance Explained"},"content":{"rendered":"\n\n\n<p>Saving for a down payment can take years, and for many, saving 20% can feel like an unachievable goal. Thankfully, mortgage loan insurance can help you purchase a home with as little as 5% down. While utilizing mortgage loan insurance can increase your overall homeownership costs, it also has many benefits. In particular, owning a home years sooner.<\/p>\n\n\n\n<p>Mortgage loan insurance has many names, including CMHC insurance and mortgage default insurance. It may also be referred to as mortgage insurance. This product was designed to encourage home buying and protect lenders from buyers at high risk of defaulting.<\/p>\n\n\n\n<p>Here\u2019s everything you need to know about CMHC insurance before you purchase a home.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"key-takeaways\">Key Takeaways<\/h2>\n\n\n\n<ul class=\"wp-block-list\"><li>CMHC insurance, also known as mortgage default insurance, is <strong>mandatory for home buyers with a down payment of less than 20%<\/strong><\/li><li>Mortgage default insurance <strong>protects the lender<\/strong> if you stop making mortgage payments<\/li><li>Mortgage loan insurance is <strong>not available on homes priced over $1.5 million<\/strong><\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"what-is-cmhc-mortgage-insurance?\">What Is CMHC Mortgage Insurance?<\/h2>\n\n\n\n<p>Mortgage loan insurance, sometimes called CMHC insurance, is required if you purchase a home with a down payment of less than 20% of the home\u2019s purchase price. A mortgage with CMHC insurance is known as an insured mortgage.&nbsp;<\/p>\n\n\n\n<p>This insurance is designed to protect lenders if homeowners stop paying their mortgages.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"do-you-have-to-get-mortgage-default-insurance?\">Do You Have to Get Mortgage Default Insurance?<\/h2>\n\n\n\n<p>Mortgage loan insurance is mandatory in Canada if you purchase a home with a down payment of less than 20% of the home\u2019s purchase price.&nbsp;<\/p>\n\n\n\n<section class=\"wp-block-zolo-related flex items-center py-6 leading-tight border-t border-b border-blacklight undefined\"><p class=\"font-serif pr-6 md:pr-12 mr-6 md:flex-shrink-0 border-r border-blacklight\">Related content<\/p><p class=\"related-link w-full my-0\"><a href=\"https:\/\/www.zolo.ca\/blog\/down-payment-assistance-programs\">Down Payment Assistance Programs in Canada<\/a><\/p><\/section>\n\n\n\n<p>The need for mortgage default insurance depends on your loan-to-value ratio (LTV). The LTV is calculated by comparing the amount you are borrowing to the total purchase price. For example, if you make a 5% down payment on a home, your LTV ratio is 95%.<\/p>\n\n\n\n<p>Any mortgage with an LTV of more than 80% is considered a high-ratio mortgage, and mortgage insurance is required.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"1024\" height=\"1110\" loading=\"lazy\" src=\"https:\/\/www.zolo.ca\/blog\/wp-content\/uploads\/2024\/11\/164535-Loan-to-Value-Ratio_Superside_D1_164535-Loan-to-Value-Ratio_Superside_D2.png\" alt=\"\" class=\"wp-image-24331\"\/><\/figure>\n\n\n\n<p>Mortgage insurance is not available on homes priced over $1.5 million since these homes require a minimum down payment of 20%.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"cost-of-mortgage-insurance\">Cost of Mortgage Insurance<\/h2>\n\n\n\n<p>If you plan to purchase a home with a down payment of less than 20%, you\u2019ll need to factor mortgage default insurance into your budget.<\/p>\n\n\n\n<p>There are three costs to take into consideration:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Premium<\/strong> &#8211; The mortgage insurance premium is calculated depending on your loan-to-value ratio (LTV). The higher the LTV, the higher the premium<\/li><li><strong>Interest<\/strong> &#8211; If you aren\u2019t able to pay your default insurance premium upfront, it will be added to your mortgage, which will result in extra interest charges<\/li><li><strong>Provincial Sales tax<\/strong> &#8211; In Manitoba, Quebec, Ontario, and Saskatchewan, provincial sales tax is added to the mortgage insurance premium, which is paid as a lump sum along with other closing costs<\/li><\/ul>\n\n\n\n<p>As of October 2024, the <a href=\"https:\/\/www.cmhc-schl.gc.ca\/professionals\/industry-innovation-and-leadership\/industry-expertise\/resources-for-mortgage-professionals\/mortgage-loan-insurance-and-premiums\">standard purchase premiums<\/a> are as follows:<\/p>\n\n\n\n<div id=\"footable_parent_24335\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui colored_table\">\n                <table data-ninja_table_instance=\"ninja_table_instance_0\" data-footable_id=\"24335\" data-filter-delay=\"1000\" aria-label=\"CMHC Standard Purchase Premiums\"            id=\"footable_24335\"\n           data-unique_identifier=\"ninja_table_unique_id_3632944797_24335\"\n           class=\" foo-table ninja_footable foo_table_24335 ninja_table_unique_id_3632944797_24335 ui table  nt_type_legacy_table hide_horizonal_borders hide_vertical_borders striped compact vertical_centered ninja_custom_color inverted footable-paging-right ninja_table_search_disabled ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_down_payment_amount \">Down payment amount<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_premium_added_to_mortgage \">Premium added to mortgage<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"17336\" class=\"ninja_table_row_0 nt_row_id_17336\">\n            <td>5% to 9.99%<\/td><td>4.00%<\/td>        <\/tr>\n            <tr data-row_id=\"17337\" class=\"ninja_table_row_1 nt_row_id_17337\">\n            <td>10% to 14.99%<\/td><td>3.10%<\/td>        <\/tr>\n            <tr data-row_id=\"17338\" class=\"ninja_table_row_2 nt_row_id_17338\">\n            <td>15% to 19.99%<\/td><td>2.80%<\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table>\n    \n    \n    \n<\/div>\n\n\n\n\n<p>For mortgages with a down payment between 20% and 35%, mortgage loan insurance is added. However, the lender typically pays for the insurance without passing the cost on to you.&nbsp;<\/p>\n\n\n\n<section class=\"wp-block-zolo-related flex items-center py-6 leading-tight border-t border-b border-blacklight undefined\"><p class=\"font-serif pr-6 md:pr-12 mr-6 md:flex-shrink-0 border-r border-blacklight\">Related content<\/p><p class=\"related-link w-full my-0\"><a href=\"https:\/\/www.zolo.ca\/blog\/how-much-house-can-i-afford\">How Much House Can I Afford?<\/a><\/p><\/section>\n\n\n\n<p>Mortgage loan insurance can add thousands of dollars over the life of your mortgage. For example, if you buy a home for $500,000, the total mortgage amount varies depending on the size of your down payment and the mortgage default insurance premium.<\/p>\n\n\n\n<div id=\"footable_parent_24336\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui colored_table\">\n                <table data-ninja_table_instance=\"ninja_table_instance_1\" data-footable_id=\"24336\" data-filter-delay=\"1000\" aria-label=\"CMHC Mortgage Insurance Cost\"            id=\"footable_24336\"\n           data-unique_identifier=\"ninja_table_unique_id_1629809531_24336\"\n           class=\" foo-table ninja_footable foo_table_24336 ninja_table_unique_id_1629809531_24336 ui table  nt_type_legacy_table hide_horizonal_borders hide_vertical_borders striped compact vertical_centered ninja_custom_color inverted footable-paging-right ninja_table_search_disabled ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                            <col class=\"ninja_column_2 \">\n                            <col class=\"ninja_column_3 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_down_payment_percentage \">Down payment percentage<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_down_payment_amount \">Down payment amount<\/th><th scope=\"col\"  class=\"ninja_column_2 ninja_clmn_nm_mortgage_default_insurance_premium \">Mortgage default insurance premium<\/th><th scope=\"col\"  class=\"ninja_column_3 ninja_clmn_nm_total_mortgage_amount \">Total mortgage amount<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"17339\" class=\"ninja_table_row_0 nt_row_id_17339\">\n            <td>5%<\/td><td>$25,000<\/td><td>$19,000<\/td><td>$494,000<\/td>        <\/tr>\n            <tr data-row_id=\"17340\" class=\"ninja_table_row_1 nt_row_id_17340\">\n            <td>10%<\/td><td>$50,000<\/td><td>$13,950<\/td><td>$463,950<\/td>        <\/tr>\n            <tr data-row_id=\"17341\" class=\"ninja_table_row_2 nt_row_id_17341\">\n            <td>15%<\/td><td>$75,000<\/td><td>$11,900<\/td><td>$436,900<\/td>        <\/tr>\n            <tr data-row_id=\"17342\" class=\"ninja_table_row_3 nt_row_id_17342\">\n            <td>20%<\/td><td>$100,000<\/td><td>N\/A<\/td><td>$400,000<\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table>\n    \n    \n    \n<\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\" id=\"benefits-of-mortgage-loan-insurance\">Benefits of Mortgage Loan Insurance<\/h2>\n\n\n\n<p>While the downside of mortgage default insurance is that you will pay more for your mortgage, there are also several advantages.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"1721\" loading=\"lazy\" src=\"https:\/\/www.zolo.ca\/blog\/wp-content\/uploads\/2024\/11\/163724-CMHC-Mortgage-Insurance_Inline-image_Superside_D1-1024x1721.png\" alt=\"\" class=\"wp-image-24333\"\/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">Smaller Down Payment<\/h3>\n\n\n\n<p>For many, saving 20% for a down payment takes considerable time. By saving 5%, you may be able to own a home years sooner.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Lower Interest Rates<\/h3>\n\n\n\n<p>One of the most significant benefits of CMHC insurance is that mortgage lenders offer their best <a href=\"https:\/\/www.zolo.ca\/blog\/how-to-negotiate-mortgage-rates-canada\">mortgage interest rates<\/a> to those with insured mortgages.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Helps Stabilize the Housing Market<\/h3>\n\n\n\n<p>Insured mortgages support the housing market in Canada by protecting lenders against defaults and foreclosures.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"who-offers-mortgage-insurance-in-canada?\">Who Offers Mortgage Insurance in Canada?<\/h2>\n\n\n\n<p>There are three providers of mortgage default insurance in Canada:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><a href=\"https:\/\/www.cmhc-schl.gc.ca\/consumers\/home-buying\/mortgage-loan-insurance-for-consumers\">Canada Mortgage and Housing Corporation<\/a> (CMHC)<\/li><li><a href=\"https:\/\/www.sagen.ca\/\">Sagen<\/a> (formerly Genworth Canada)<\/li><li><a href=\"https:\/\/www.canadaguaranty.ca\/\">Canada Guaranty<\/a><\/li><\/ul>\n\n\n\n<p>The Canadian Mortgage and Housing Corporation is the most widely known, which is why many people refer to mortgage default insurance as &#8220;CMHC insurance.&#8221; The CMHC is a crown corporation that serves as Canada&#8217;s national housing agency.<\/p>\n\n\n\n<p>Sagen and Canada Guaranty are private companies that also offer mortgage default insurance.<\/p>\n\n\n\n<section class=\"wp-block-zolo-related flex items-center py-6 leading-tight border-t border-b border-blacklight undefined\"><p class=\"font-serif pr-6 md:pr-12 mr-6 md:flex-shrink-0 border-r border-blacklight\">Related content<\/p><p class=\"related-link w-full my-0\"><a href=\"https:\/\/www.zolo.ca\/blog\/how-do-mortgage-payments-work\">How Does a Mortgage Work?<\/a><\/p><\/section>\n\n\n\n<p>As a borrower, you may not notice a difference between providers, as their requirements and premium rates are essentially the same.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">How to Qualify For Mortgage Insurance<\/h3>\n\n\n\n<p>While mortgage loan insurance may be mandatory, you will have to qualify for a high-ratio mortgage through the following:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Good credit <\/strong>&#8211; For CMHC, the<a href=\"https:\/\/www.zolo.ca\/blog\/credit-score-for-mortgage\"> minimum credit score<\/a> is 600, and for Sagen, the minimum score is 680. Canada Guaranty does not publish its minimum credit score but states that a strong credit profile is required<\/li><li><strong>Debt<\/strong> &#8211; Your Gross Debt Service ratio must be less than 39%, and your Total Debt Service ratio must be less than 44%<\/li><li><strong>Purchase price <\/strong>&#8211; The purchase price must be less than $1.5 million<\/li><li><strong>Amortization<\/strong> &#8211; The maximum amortization period is currently 25 years. However, it has <a href=\"https:\/\/www.zolo.ca\/blog\/30-year-mortgages-for-first-time-homebuyers\">increased to 30 years<\/a> for first-time homebuyers and buyers of new builds.<\/li><\/ul>\n\n\n\n<p>In addition, the home must be in Canada and a primary residence. For multi-unit homes of up to four units, one unit must be owner-occupied. On the other hand, Sagen and Canada Guaranty offer mortgage loan insurance for certain types of second homes.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"mortgage-default-insurance-vs-mortgage-protection-insurance\">Mortgage Default Insurance vs Mortgage Protection Insurance<\/h2>\n\n\n\n<p>People often confuse mortgage default insurance with mortgage protection insurance. However, they are two different products with different purposes. In short, mortgage default insurance protects your lender if you default on your mortgage. Compared to mortgage protection insurance, which protects you if you are unable to make your mortgage payments.<\/p>\n\n\n\n<p>Learn about the differences between mortgage default insurance and mortgage protection insurance below:<\/p>\n\n\n\n<div id=\"footable_parent_24337\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui colored_table\">\n                <table data-ninja_table_instance=\"ninja_table_instance_2\" data-footable_id=\"24337\" data-filter-delay=\"1000\" aria-label=\"Mortgage Default Insurance vs Mortgage Protection Insurance\"            id=\"footable_24337\"\n           data-unique_identifier=\"ninja_table_unique_id_1063529915_24337\"\n           class=\" foo-table ninja_footable foo_table_24337 ninja_table_unique_id_1063529915_24337 ui table  nt_type_legacy_table hide_horizonal_borders hide_vertical_borders striped compact vertical_centered ninja_custom_color inverted footable-paging-right ninja_table_search_disabled ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                            <col class=\"ninja_column_2 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_product \">Product<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_mortgage_default_insurance_cmhc_insurance \">Mortgage Default Insurance (CMHC Insurance)<\/th><th scope=\"col\"  class=\"ninja_column_2 ninja_clmn_nm_mortgage_protection_insurance_mpi \">Mortgage Protection Insurance (MPI)<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"17343\" class=\"ninja_table_row_0 nt_row_id_17343\">\n            <td>Who does it protect?<\/td><td>Protects your lender if you stop making mortgage payments and default on your mortgage<\/td><td>Protects you if you are unable to make your mortgage payment due to factors outside of your control, like a critical illness, disability, or death<\/td>        <\/tr>\n            <tr data-row_id=\"17344\" class=\"ninja_table_row_1 nt_row_id_17344\">\n            <td>Who pays for it?<\/td><td>You, as a lump sum at closing, or added to your mortgage principal paid monthly or biweekly<\/td><td>You, in monthly installments or a yearly premium<\/td>        <\/tr>\n            <tr data-row_id=\"17345\" class=\"ninja_table_row_2 nt_row_id_17345\">\n            <td>Is it required?<\/td><td>Yes, if you purchase a home with a down payment of less than 20% of the home\u2019s purchase price<\/td><td>No, MPI is not required to buy a home<\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table>\n    \n    \n    \n<\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\" id=\"final-thoughts\">Final Thoughts<\/h2>\n\n\n\n<p>Many people see CMHC insurance as a punishment for not having a 20% down payment, but this is not the case. Mortgage loan insurance is a tool that many Canadians can use to own a home sooner and access the best mortgage interest rates.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"cmhc-insurance-faqs\">CMHC Insurance FAQs<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">Do I have to get mortgage insurance?<\/h3>\n\n\n\n<p>Canadian mortgage lenders require default insurance for home purchases with less than a 20% down payment. There are a few ways to avoid mortgage default insurance:<\/p>\n\n\n\n<ol class=\"wp-block-list\"><li>Make at least a 20% down payment<\/li><li>Work with a private lender or credit union for your mortgage. These lenders are not federally regulated and may choose not to impose mortgage default insurance.<\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\">Can I cancel CMHC mortgage insurance?<\/h3>\n\n\n\n<p>In short, you can\u2019t cancel CMHC insurance. However, if you sell your current home and buy another house, you can take advantage of the <a href=\"https:\/\/www.cmhc-schl.gc.ca\/professionals\/project-funding-and-mortgage-financing\/mortgage-loan-insurance\/mortgage-loan-insurance-homeownership-programs\/cmhc-portability\">portability option<\/a>. The portability option reduces or eliminates the premium amount owed on the newly insured mortgage.<\/p>\n\n\n\n<p>When you\u2019re <a href=\"https:\/\/www.zolo.ca\/blog\/mortgage-renewal\">renewing your mortgage<\/a>, it may be possible to switch from an insured loan to an uninsured loan, provided you have at least 20% equity in your home. However, you may lose access to the best interest rates.<\/p>\n\n\n\n<p>In addition, you may be eligible for a 25% refund if you make energy-efficient upgrades to your home through the <a href=\"https:\/\/www.cmhc-schl.gc.ca\/consumers\/home-buying\/mortgage-loan-insurance-for-consumers\/cmhc-eco-products\/cmhc-eco-plus\">CMHC Eco Plus<\/a> program.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Learn the benefits, costs and eligibility requirements of mortgage default insurance<\/p>\n","protected":false},"author":112,"featured_media":24328,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[],"guide":[],"class_list":["post-24327","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buying"],"acf":[],"zolo_excerpt":"","_links":{"self":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts\/24327","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/users\/112"}],"replies":[{"embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/comments?post=24327"}],"version-history":[{"count":9,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts\/24327\/revisions"}],"predecessor-version":[{"id":24442,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts\/24327\/revisions\/24442"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/media\/24328"}],"wp:attachment":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/media?parent=24327"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/categories?post=24327"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/tags?post=24327"},{"taxonomy":"guide","embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/guide?post=24327"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}