What is CMHC Mortgage Insurance?

The Canada Mortgage Housing Corporation provides mortgage loan insurance to lenders for home buyers with a down payment of less than 20%, to as low as 5%. It offers a way for borrowers to get away with putting down a lower down payment than a lender might like.

However, it is important to note that this insurance is not meant to protect the buyer; it is used to protect the lender. CMHC insurance guarantees the bank or credit union that it will not lose money on this high ratio mortgage. If a borrower has more “skin in the game,” he or she is considered less of a risk. A 20% down payment usually represents a large commitment to the home, and a lender can feel reasonably sure that such a borrower won’t default on the mortgage loan.

How Does CMHC Insurance Work?

CMHC mortgage insurance is purchased to compensate the lender in the event that you default on your loan. Since it is the lender that is putting up the capital for your home purchase, the lender takes on the bulk of the risk of you don’t follow through. Insurance can help offset some of the risk involved.

It is the lender that technically pays the CMHC mortgage insurance premium, though the cost will pass to you. Many lenders add the insurance premium amount into the mortgage, so that you will not need to pay it immediately.

What is CMHC Mortgage Insurance?How much will CMHC insurance cost you?  There are three cost tiers for employed people with verifiable income:

  • 15% to less than 20% down payment requires a standard insurance premium of 1.75%
  • 10% to less than 15% down payment requires a standard insurance premium of 2.00%
  • 5% to less than 10% down payment requires a standard insurance premium of 2.75%

There is also a premium paid on mortgages that are amortized over more than 25 years.

  • Over 25 years, up to and including 30 years, carry an extended amortization surcharge of 0.2%
  • Over 30 years, up to and including 35 years, carry an extended amortization surcharge of 0.4%

As you can see, the smaller your down payment, the more you pay in charges. On top of that, if you want a longer mortgage term (resulting in a smaller monthly payment), you have to be willing to pay the surcharge. The longer your mortgage term, especially when combined with a smaller down payment, the larger the chance that you default on your commitment.

If you want to reduce your costs, the CMHC has a program that provides a 10% refund on your premiums and no surcharge on extended amortizations if you purchase an energy eficient home, or if you renovate your home to make it more energy efficient. If you are environmentally conscious, this can be a great way to save a little money, as well as the earth.

While you would benefit from having a 20% down payment, in both interest and premiums saved, CMHC mortgage loan insurance serves a purpose by allowing people to buy a house with a smaller down payment. Being insured against loss, the bank is less concerned about the higher risk they take on, which allows the buyer to stop renting and start building equity in a home of their own.

Before you decide to buy a house, though, think about whether or not you can afford a bigger down payment. Weigh the costs and benefits of saving up for a down payment and paying less over time, or getting into a home sooner, but paying a larger amount over the life of your loan. Only you can decide which scenario is likely to provide you with the best use of your financial resources.

Written by Tom Drake

Tom Drake is the owner and head writer of Canadian Finance Blog. While you’re here, consider signing up for the RSS feed or email subscription. Both deliver the latest articles directly to you! You can also follow me on Twitter for all the latest posts or to send me any comments or questions!

50 Responses to What is CMHC Mortgage Insurance?

  1. we bought our home when you needed 25% plus to not pay CHMC and it was tough. I’m glad they lowered it to 20%.

    If it wasn’t for cmhc it would be extremely difficult to save up an adequate down payment if you also had to pay rent.

    • I’m not positive, but I believe the amount available to be borrowed also counts in your percentage. For example, if you have a mortgage for 50% and you want a HELOC for another 30%, then that counts at 80% since your debt level on the house could potentially be up to 80% the very next day.

    • The premium is added to the base loan amount. The base loan amount is the figure used to calculate your LTV (Loan to Value) ratio. 100,000 Home Value 80,000 @ 80% LTV PLUS the insurance premium.

  2. Hello There,
    Is there a good benefit that I can get to waive the CMHC Insurance since it is for the soul benifits of the lender not for the borrower which is myself. I just recently bought a property and the cost of CMHCI insurance is $16,300 Which I think is really high. I put a down payment of 10% which the mortgage broker told me to do so plus the transfer of property that cost me $16,200.Is there anybody there who can enlighten me or have the experience with all this process which I feel something in the process is wrong. Please advice or give your comment.
    Thanks, and have a nice holiday!

    • Now imagine you sell the property after a few years: NO REFUND.

      CMHC is a disgusting scam. It is not “insurance”. They pay out a small fraction of the “premiums” they take in, so its more of a shakedown racket. And if it were insurance, YOU the payor, would get the benefit – you don’t! The bank benefits.

  3. Saving up to input a decent percentage of your down payment to get a better rate is a good idea for the long term of your mortgage as you will save more money overall due to the lowered insurance premium and it also shows the bank you are more committed to the mortgage.

  4. Having a large downpayment on a house only shows that you have either a VERY good job or someone who is willing to help you out. As a person who has an OK job but has to spend a huge percentage of that on rent to keep roof over her head, I find the banks viewpoint that a big downpayment somehow makes you more commited laughable. I would do almost anything to be able to get a house, but as a single parent with a child to provide for, the idea that I can somehow come up with 10% for a house in Edmonton with costs being around 200,000 is obscene. All I see are the rich looking out for the rich leaving the hard working poor like me out in the dust.

  5. This is an informative read. CMHC has allowed people to purchase their own home sooner, without having to save the 20% down, which means they can pay off the mortgage at a younger age.

  6. can i skip a payment once a year if needed, i have been told by the bank i cannot because i am with CMHC and they do not allow this.
    thx

  7. So what you are saying is the the borrower should take out additional insurance to protect themselves. How sad that individuals with little asset are also paying the most for insurance.

  8. I am an +50 woman who together with my partner is trying to buy a home. Because we are both older we do not want to take out a large mortgage. Because of the very high prices of houses and townhouses, we can only afford to buy an apartment or a manufactured home. We have found a manufactured home that suits our needs and have put in an offer that’s been accepted. Our bank is willing to finance the purchase, we have a 20% downpayment but because its in a 50+ park the CMHC is refusing to insure the mortgage loan. Is there anything we can do about this. I feel they are discriminating against me because of my age and economic situation. If I was wealthy and could afford a regular residential home I guess there would not be a problem.

    • It is actually the park in which you are purchasing that is doing the age discriminating. By not allowing anyone under the age of 51 to purchase, they are excluding those of a younger age. CMHC has a mandate to make home ownership available to everyone; therefore they do not provide insurance on properties which exclude people. Age restricted properties are not and will not be allowed under a CMCH insurance program. There are two other insurers in Canada (Genworth and Canada Guarantee). I suggest you contact a broker to see what your options may be with either of the two.

    • Obtain foreign exchange St Albans with all your debit cards at an ATM from the airport arrivals corridor or foyer or the closest bank when you finally arrive at the destination. The alternate rate is normally better from the destination land than at your home.

  9. We had the same problem buying a condo. We had three mortgages approved by the bank – all turned down by CMHC and Genworth because they were 55+ buildings. They basically lied the 1st and 2nd times and gave other reasons for turning the deal down but finally the broker and agent were so aggravated they pushed CMHC to the wall and they admitted they won’t insure 55+ buildings – said they were “nursing homes”! We ended up with a $40,000 higher mortgage – which CMHC happily insured – in a mixed age building with pot-smoking party animals for neighbours. CMHC is not supposed to discriminate based on ethnicity, religion, colour, language but discrimination based on AGE is just fine.

    • Check your story. It is clear in CMHC’s policy that they will not provide insurance on age restricted properties. Your bank would not have had to “Push CMHC to the wall” to obtain that info – nothing to admit – it is clear in their publications.

    • I might also mention that CMHC will not insure “Age Restricted” properties. It doesnt matter if the restriction is 30+ 40+ 60+.

  10. The only limit to our realization of tomorrow will be our doubts of today
    sencart has some thing your need ,first-rate, attractive and reasonable price
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  11. When you want to sell your house and buy a new one, essentially breaking your current mortgage with the bank, can the CMHC transfer from one lender to another? Or obtain a refund by prorating? If not, that means you would lose that CMHC lum sum, if you move to a new lender for your new home. Your advice is appreciated!

    • Carmen, it is absolutely possible to transfer your already paid premium to a new mortgage (on the same property) with a new lender, but CMHC doesn’t do it automatically, and many lenders don’t think to ask, or don’t know it’s possible. You’ll need your CMHC application number from your existing lender, and you may have to pay an adjustment if the loan to value ratio of your mortgage has increased.

      You’ll have to initiate the request at your new lender, but it can be done. Good luck!

  12. I was wealthy and could afford a regular residential home and I see are the rich looking out for the rich leaving the hard working.

  13. Hi, Tom.
    Could i skip a payment once I have low budget? Somebody told me that is not possible as I am in CMHC Mortgage. Regards

  14. Me and my hubby are so pissed off…
    We talked to our stupid bank, and they approved us, they gave us the go ahead for a house.
    Stupid CMHC turned us down…
    We even found a house that we both loved, and the seller of the house accepted our offer.. Then a few days later, we got turned down by CMHC…
    Somebody should fire those idiots!!!!!!

  15. We were told by the bank that CMHC declined us because we didn’t have a ‘gift of 20,000 signed’
    How pathetic is that??? As if anyone has 20,000 they are going to gift us?!!!?!!

    • If you had the $20,000 and it was not a gift, you have to prove that you saved it yourself and that it didn’t come from debt. The downpayment has to be 100% free and clear, even if it is a gift. If a gift, you MUST provide a letter from the person who gifted you the down payment.

  16. Hi Tom,
    I purchased a home 4 years ago and had to insure with CMHC (about $10,000 paid up front). Now I’m selling the home and moving into a rental. Since the insurance covers the life of the mortgage, do they ever refund at a pro-rated level if the insurance is no longer needed? I’m not purchasing after this sale.

  17. Hi

    I have the same problem as Zaak, had to insure the mortgage 3 years ago because need only 5% more to get to the min 20%, (we needed 8000 to have 20%, but had 8600$ premium added to our mortgage, calculate how much it will be for the life time of mortgage :() what the silly decision we made, I wish we had a good consultant. Anyway it’s history now, we’re selling our apartment and for the new house we have 20% down, we also changed the mortgage company and have no relation with the first bank we insured the mortgage for their protection! now who this premium goes to in next 30 years? second company? CMHC?… why when the risk is no longer valid, we have to pay the premium? it’s the most unfair business I’ve ever seen.

  18. CMHC provides mortgage insurance to LENDERS not to BORROWERS!!! So, if the banks want to make huge profits by lending you money and to have 100% protection on investment, then BANKS, not YOU BORROWERS should pay loan insurances!!!.
    $200 000 loan equals $10 000 down payment plus $5 225 loan insurance and $1169.18 monthly payment for 25 years. In the first year bank would collect from you interest in the amount of $9906.35; In 2 years – $19601.71; In 3 years – $29075.30, and so on for the total $150754 in interest paid to the bank in 25 years.
    If you lose your job and can’t pay – you lose your home. If your property goes down in value and you cannot pay, you will end up in dept. There is no protection for home buyers.
    For the banks, it does not matter what happens to the house market or to the lender, they will get their interest plus money back on the investment from CMHC.
    So, the question is why CMHC (taxpayers run organization which supposed to assist Canadians) allows banks to pass this fee to the borrowers. By looking at the banks’ hefty profits there is a margin for the banks to pay THEIR insurance for THEIR investment.

    • I agree 100%. The practice of the banks to have the borrower pay for the cost of CMHC insurance is criminal and should be stopped by the govenment.

  19. In May 2012, the CMHC had approved 272 loans for the full $2 billion available under the Municipal Infrastructure Lending Program. I think this is a great thing.

  20. This site is very good and informative site for every man.One of the important services a responsible loan officer offers is helping you overcome past financial difficulties that may hinder your ability to have your loan approved. if your need more information please visit :house mortgages

  21. If it wasn’t for the CMHC, Canadian real estate prices would not have skyrocketed as they have. The CMHC was a good thing at one time, it is now a subversive, and dangerous, entity.

  22. Do you know if any other mortgage insurer will cover mortgages in mobile home parks without age restrictions? We applied for a small loan on a mobile with 5% down and got approval from the bank but declined by CMHC. My broker told me that CMHC is the only insurer that will cover mobiles. We decided to use more of our savings and put down 20% in order to avoid CMHC but have been told they are probably still going to require the insurance and we will probably still be declined????

    Does anyone else insure mobiles?????

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  24. We have a first mortgage thats coming up for renewal in a few months. The balance would then be 355K and the property value according to a recent appraisal is 599K. We also have a second mortgage of 80K on this property. When the first mortgage comes up for renewal, does the lender have to insure it thru CMHC? i don’t think they have to cause we owe them less than 80% of the home value, just wanted a reliable answer. Thanks

  25. We went with a 20% down payment just to avoid the CMHC costs. Why should I pay to insure a bank against a loss?

    (The other reason for the large down payment was that we see any debt as bad, and the less we take on, the better.)

    Of course, this is a lot easier with housing prices in small-town Nova Scotia. You folks in Toronto and Vancouver trying to get into the housing market really do have my sympathy.

  26. I see your point, Fred. However, I think it’s the lender’s rersponsibility to only give out money to people who have the ability to pay it back.
    In 2008 everyone in the US knew the housing bubble was going to burst and all those mortgages would be bad. But lenders kept handing out their money and then selling off the mortgages as CDO’s, hoping it wouldn’t be themselves holding the proverbial “hot potato” when the inevitable happened.

    I don’t much care for the fact that a crown corporation exists to protect bankers from their own bad decisions. If I screw up in my job, I am responsible for the consequences. Why shouldn’t they?

  27. CMHC are borderline criminal. They don’t help anyone but the banks. They insure the banks against loss with the consumer’s money, thereby leaving the buyer with less money and less ability to pay back the loan they are insuring. The amount I had to give CMHC would have made my payments on the loan for 9 months! If anything it increases risk of default. What a joke, they should be shut down but the banks like having them around and it doesn’t cost the banks a thing so we are stuck with the CMHC. Democracy? Yeah right, when did the people ever matter to the banks or the government?

    • I do think the CMHC insurance is a complete scam. I’m surprised no one has filed a lawsuit regarding this criminal practice.

      I had to pay mortgage insurance with 10% down 3 years ago to protect the lender. Even though I paid for insurance, I was still mandated to get a guarantor. Now that my mortgage is up for maturity, I am being denied new mortgage applications without a co-applicant to go on title. Now, even a guarantor isn’t good enough for lenders fully protected by mortgage insurance. I am being screwed over after making every payment on time, increasing my credit history and lowering my principal. My income is solid and I have been in the same full-time job for 10 years. The whole system is a total scam that very few people have realized. I’m appalled and disgusted by the whole process! I can’t seem to get the best interest rate unless I agree to ridiculous conditions like putting someone else on title to get the best interest rate.

  28. Interesting read especially for first time home owneres. I guess it will all depend on what works best for you and the research must be done before you get too caught up in house buying. Thanks for sharing!

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