Mortgage insurance is an insurance policy which compensates lenders or investors for losses due to the default of a mortgage loan. Mortgage insurance can be either public or private depending upon the insurer. The policy is also known as a mortgage indemnity guarantee (MIG), particularly in the UK. Mortgage life insurance guarantees repayment of a mortgage loan in the event of death or, possibly, disability of the borrower.

What is CMHC Mortgage Loan Insurance?

Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protects lenders against mortgage default, and enables consumers to purchase homes with as little as 5% down payment — with interest rates comparable to those with a 20% down payment.

To obtain mortgage loan insurance, lenders pay an insurance premium. Typically, your lender will pass this cost on to you. The premium payable is based on a percentage of the home’s purchase price that is financed by a mortgage. The premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments.

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 be a burden to your estate.

Who Needs Mortgage Loan Insurance?

Typically, lenders require mortgage loan insurance for loans made to anyone that wishes to purchase a home with less than 20% of the purchase price. The Canadian Bank Act prohibits most federally regulated lending institutions from providing mortgages without mortgage loan insurance for amounts that exceed 80% of the value of the home or purchases with less than 20% down payment.

Through your lender, CMHC Mortgage Loan Insurance enables you to finance up to 95% of the purchase price of a home.

Use our mortgage calculator to help calculate the maximum house price you can likely afford, the maximum mortgage amount you can likely borrow, and your likely monthly mortgage payments (principal + interest). To learn more about the process of buying a home, see Home buying Step by Step. It can take the confusion out of the home buying process by helping you understand the various aspects to buying the home you really want.

What are the General Requirements to Qualify for Homeowner Mortgage Loan Insurance?

• The home is located in Canada.
• You will typically have a down payment of at least 5% of the purchase price of the dwelling, depending on the dwelling type.
  • Single-family and two-unit dwellings (5% minimum down payment)
  • Three- or four-unit dwellings (10% minimum down payment)
• Normally, the minimum down payment comes from your own resources. However, a gift of a down payment from an immediate relative is acceptable for dwellings of 1 to 4 units. For eligible borrowers, additional sources of down payment, such as lender incentives and borrowed funds, are also permitted. Check with your lender for qualifying criteria and availability.
• Your total monthly housing costs, including Principal, Interest, property Taxes, Heating (P.I.T.H.), the annual site lease in the case of leasehold tenure and 50% of applicable condominium fees, shouldn’t represent more than 32% of your gross household income (Gross Debt Service (GDS) ratio). Use the GDS form to calculate how much you can afford in housing costs to be eligible.
• Your total debt load shouldn’t be more than 40% of your gross household income. The Total Debt Service (TDS) ratio is your P.I.T.H. + the annual site lease in the case of leasehold tenure and 50% of condominium fees (if applicable) + payments on all other debt / gross annual household income. Add up your costs and determine your Total Debt Service ratio using the TDS form.
• You also need to think about closing costs (for example, legal and land transfer fees) equivalent to 1.5% to 4% of the purchase price. Many first-time buyers are surprised by these costs. That is why, when qualifying for CMHC’s Mortgage Loan Insurance, our Home Purchase Cost Estimate worksheet form will help you calculate your total homebuying costs.Closing costs include but are not limited to one-time items such as lawyer fees, GST and PST as applicable, land transfer tax if applicable, adjustments, etc., to allow you to complete the house purchase.
• Other requirements may apply and are subject to change. For details, please contact your lender or mortgage broker.

Flexible Financing Options

As Canada’s national housing agency, CMHC is uniquely positioned to offer you a range of financing options to ensure you have access to a wide choice of quality, affordable housing.

CMHC Purchase
Enables homebuyers to purchase a home with as little as 5 per cent down payment from traditional and non-traditional sources.

CMHC Portability
Allows repeat users to save money by shifting their CMHC-insured mortgage loan from an existing home to a new home, and reducing or eliminating the premium on a newly-insured loan.

CMHC Refinance
Allows borrowers to refinance their mortgage and use the money for any purpose other than default management.

CMHC Improvement
Offers greater choice to borrowers who are building new homes or who want to undertake small or large scale improvements to existing homes.

CMHC Line of Credit
Provides borrowers with more flexible repayment options than traditional mortgages

CMHC Self-Employed
Allows self-employed borrowers, with or without traditional forms of income verification, to realize their dreams of homeownership.

CMHC Newcomer
Provides newcomers to Canada, with permanent or non-permanent residence status, access,to CMHC mortgage loan insurance products through Approved Lenders.

CMHC Green Home
Provides mortgage loan insurance for the purchase of an energy-efficient home or to make energy-efficient improvements to an existing home. Borrowers may be eligible for extended amortization without a premium surcharge and a 10 per cent mortgage insurance premium refund.

CMHC Second Home
Gives borrowers with high ratio financing a chance to buy or refinance a second home using any CMHC homeowner product, without additional underwriting restrictions or premiums.

CMHC Income Property
Provides investors with more housing finance choice when buying or refinancing a 1 – 4 unit rental property.

CMHC Chattel Insurance
Assists the financing of owner-occupied manufactured or floating homes where a traditional real estate mortgage may not be possible.

CMHC Self-Directed RRSPs
Insures Registered Retirement Savings Plan- (RRSP) or Registered Retirement Income Fund (RRIF)-funded homeownership mortgages for the purchase or refinance of new or existing owner-borrower occupied properties.

Please check with your lender for the qualifying criteria and availability of these innovative products within their product offerings.