Mortgage Loan Insurance and Premiums
What is Mortgage Loan Insurance?
Lenders typically require mortgage loan insurance when homebuyers make a down payment of less than 20% of the purchase price up to $1,000,000. Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with a minimum down payment of 5% — with interest rates comparable to those with a 20% down payment. Properties with a purchase price over $1,000,000 can not qualify for Mortgage loan insurance therefore, requiring 20% down payment or more. In Canada, there are three Mortgage Loan Insurers: Canada Mortgage and Housing Corporate, Genworth Financial, and Canada Guaranty.
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.
Remember: without mortgage insurance you must put down more than 20% down payment to buy a home less than $1,000,000. At the end of the day, for the vast majority of borrowers, the cost of CMHC Mortgage Loan Insurance is more than fully offset by the savings achieved.
A 10% premium refund, and a premium refund for a longer amortization period (if applicable) may be available when CMHC Mortgage Loan Insurance is used to finance an Energy-Efficient Homes.
How Much Does it Cost?
The following table provides you with a general idea of the premiums charged by CMHC. The exact premium will be calculated when you apply for a mortgage and provincial sales tax may apply.
|Loan-to-Value Ratio||Standard Premium (Current)||Standard Premium (Effective May 1st, 2014)|
|Up to and including 65%||0.50%||0.60%|
|Up to and including 75%||0.65%||0.75%|
|Up to and including 80%||1.00%||1.25%|
|Up to and including 85%||1.75%||1.80%|
|Up to and including 90%||2.00%||2.40%|
|Up to and including 95%||2.75%||3.15%|
|90.01% to 95% – Non-Traditional Down Payment||2.90%||3.35%|
Please see: http://www.cmhc-schl.gc.ca/en/corp/nero/nere/2014/2014-02-28-1100.cfm?WT.cg_n=TWT_MLI for more information on the changes to premiums.
*The maximum loan-to-value for refinance is 80%. Premium savings may be available if you are porting an existing CMHC-insured mortgage or if you are using CMHC-insured financing to purchase an energy-efficient home or make energy-saving renovations
** Source: http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_005.cfm
Government of Canada Offers Homeownership Incentives
Canada’s Economic Action Plan Offers Incentives for Homeownership
Buying your first home is one of the largest investments of your life. Canada’s Economic Action Plan introduces the First-Time Home Buyers’ (FTHB) Tax Credit and the expansion of the Home Buyers’ Plan (HBP) to provide you with additional benefits and help you realize your dream of homeownership.
First-Time Home Buyers’ (FTHB) Tax Credit
The costs associated with purchasing a home, such as legal fees, disbursements and land transfer taxes, can be a particular burden for first-time homebuyers who must pay these costs, as well as save money for a down payment. To assist first-time homebuyers with the costs associated with the purchase of a home, the Government of Canada introduced a FTHB Tax Credit in 2009 — a $5,000 non-refundable income tax credit amount on a qualifying home acquired after January 27, 2009. For an eligible individual, the credit will provide up to $750 in federal tax relief starting in 2009.
Expansion of the Home Buyers’ Plan (HBP)
To provide first-time homebuyers with greater access to their RRSP savings to purchase or build a home, the Government of Canada has increased the Home Buyers’ Plan withdrawal limit to $25,000 from $20,000 per person for withdrawals made after January 27, 2009.
To obtain more information on the First-Time Home Buyers’ Tax Credit and the Home Buyers’ Plan, call 1-800-O-Canada or visit the Canada Revenue Agency website at www.cra.gc.ca.
Looking for More Homebuying Information?
When it comes to buying your home, nothing is more valuable than peace of mind. That’s why for more than 65 years, CMHC has shared a wealth of knowledge and housing expertise to contribute to a positive homeownership experience for Canadians. Browse through our wealth of homebuying information. You’ll find everything you need, from homebuying videos, to mortgage calculators, to home hunting worksheets.
CMHC also provides mortgage loan insurance that enables you to buy a home with a minimum down payment of 5% — with interest rates comparable to those with a 20% down payment. Obtain a 10% premium refund, and a premium refund for a longer amortization period (if applicable) when using CMHC-insured financing to purchase an eligible energy-efficient home. This can add up to savings of $688 for a typical $250,000 mortgage with a 5% down payment amortized over 25 years. Ask your mortgage professional about CMHC.