Mortgage Defalt Loan Insurance (What is CMHC?)

Mortgage Default Loan Insurance, or what some may call CMHC fees is a type of insurance premium required when a borrower wishes to buy a home but has less than 20% down payment. This is what is called an insured mortgage.

There are times when a borrower may have more than 20% down payment but the mortgage is still required to have default loan insurance, for various reasons.

Lenders typically give the best rates on insured mortgages because it offers an additional layer of protection for the lender against risk, such as the borrower defaulting on the loan.

In Canada, there are three mortgage default loan insurers; Genworth, Canada Guaranty and Canada Mortgage Housing Corporation (CMHC).

Therefore, not only does your financial institution have to approve your mortgage, but so does the insurer. Both have borrowing guidelines and policies that borrowers must meet.

The amount of the premium depends on the loan to value (amount of money down versus the purchase price) and other factors. This premium can be added to your mortgage or paid on closing (most borrowers add it to their mortgage).

Save!

If you already own a home that is default loan insured and you're thinking of selling and buying another property, did you know it may be possible to port your default loan insurance premium and save money on the premium for the next purchase? If your mortgage professional doesn't mention this opportunity, be sure to ask. Depending on the amount of your loan, this could save you thousands initially and thousands in interest over the lifetime of owning your home.

I'd love to help answer any questions you have! Please feel welcome to reach out anytime!