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If you currently have a mortgage on your home or are in the process of applying for one, you may see “CMHC” mentioned in the breakdown of fees and expenses.
While the CMHC plays an integral role in the Canadian real estate industry, the truth is that many people overlook the finer details of what exactly they do and what the fees they pay towards them even are.
However, if you want to learn more about how the CMHC impacts your mortgage experience, you are in the right place.
But first, if you are looking to apply for a mortgage and want to know whether you will need CMHC insurance or another form of mortgage insurance. That is why we want to offer you a free strategy call to help you navigate the mortgage process effectively. All you need to do to get started is click the link below to book your call today.
What is CMHC?
The CMHC – or Canada Mortgage and Housing Corporation – is the federal crown corporation responsible for the National Housing Act, among other crucial real estate functions.
This organization was first founded in 1946 to help veterans find housing after the Second World War. However, since then, it has become the primary body working towards housing accessibility and affordability in Canada.
What is CMHC Insurance? When Is It Required?
CMHC Insurance is the most common type of mortgage loan insurance in Canada.
In Canada, you will need mortgage loan insurance to buy a home with less than a 20% down payment. This is where the CMHC comes into play. With CMHC Insurance, a buyer can get a mortgage for up to 95% of the purchase price of a property – provided that property is your primary residence.
Mortgage insurance also allows you to secure a lower interest rate for your purchase by reducing the amount of risk the lender is taking by offering you a mortgage.
Minimum Down Payment Requirements for CMHC Insured Mortgages
While the CMHC offers the ability for buyers to get a mortgage for up to 95% of the purchase price of a property, there are some limitations in the form of minimum down payment requirements. These requirements are as follows.
- For a property bought for less than $500,000, you need a minimum of 5% down.
- For a property bought for more than $500,000, you will need a minimum of 5% down for the first $500,000 and 10% down on the remaining value. (This means that for a property worth $600,000, you would need a minimum down payment of $35,000.)
- For properties bought for more than $1,000,000, you cannot get CMHC insurance.
If You Are Ready to Invest
If you are ready to start investing or have some questions you want answered before you start investing, click the link below for a free strategy call with our mortgage team at LendCity so that we can help you invest properly and professionally.