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Canada Mortgage & Housing Corporation
What is CMHC Mortgage Loan Insurance?
Mortgage loan insurance is typically required by lenders when, home buyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with little or no down payment - with interest rates comparable to those with a 20% down payment.
As with any insurance, there are insurance premiums to be paid. The amount of premium varies and can range between 0.65% and 2.75% depending upon how much of the purchase price/home value is financed with a mortgage loan.
Mortgage loan insurance is not to be confused with mortgage life insurance, which guarantees that your remaining mortgage at the time of your death will not burdened to your estate.
How Much Does CMHC Mortgage Loan Insurance Cost?
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 your mortgage.
The CMHC Mortgage Loan Insurance 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 your borrow, the higher the percentage you will pay in insurance premiums.
Remember: without mortgage insurance you may avoid the insurance premium but you will typically pay much higher interest rates and additional administrative fees. At the end of the day, for the vast majority of borrowers, the costs of CMHC Mortgage Loan Insurance are more than fully offset by the savings achieved.
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