What is Mortgage Loan Insurance?
Having mortgage loan insurance means that if you, the borrower, default on your mortgage, the lender is paid back by the insurer - CMHC or a Genworth company. With the risk of losing their money removed, lenders have the confidence to make mortgage loans to new and repeat homebuyers of up to 100% of the purchase price of the home.
CMHC's insurance fees are based on a sliding scale dependant upon your loan to value ratio. The higher the loan to value ratio, the higher the insurance premium will be. CMHC fees are added on to the mortgage amount.
Below are the various rates charged:
Loan To Value Fee
Up to & incl. 65% .50%
Up to & incl. 75% .65%
Up to & incl. 80% 1.00%
Up to & incl. 85% 1.75%
Up to & incl. 90% 2.00%
Up to & incl. 95% 2.75%
Examples:
a) Purchase price $250,000
Less 5% down payment $ 12,500
Amount borrowed $ 237,500
Insurance fee payable is:
$237,500. x 2.75% $ 6531.25
b) Purchase price $ 500,000
10% down payment $ 50,000
Amount borrowed $450,000
Insurance fee payable is:
$450,000. x 2.0% $9,000.00
When you need a mortgage loan that is more than 80% of the purchase price of your home, you must buy mortgage loan insurance. It protects the lender and, by law, most Canadian lending institutions require it. CMHC stands for Canada Mortgage & Housing Corporation. A private insurer is Genworth, formerly known as G.E.
What does Mortgage Loan Insurance cost?
Mortgage loan insurance premiums range from O.5% - 2.75% of the amount of your loan. Non income qualifier mortgages & extended amortization mortgage do have higher insurance premiums.
The premium can be added to you mortgage loan and paid off as part of your regular mortgage payments or paid off in a lump sum at the time of purchase to save interest charges on the premium itself.
CMHC Premium Rates and Calculations
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