Default Mortgage Insurance (ie: CMHC Insurance) what is it and do I need it?
Default Mortgage Insurance, or CMHC Insurance as it is commonly referred to, is required for all mortgages where the down payment is less than 20% of the purchase price.
The insurance premium can be paid up front however is most commonly added back into the mortgage.
ex: $100,000 Purchase Price with 5% down (ie: $5,000)=$95,000 Mortgage amount
Default Mortgage Premium: $3,800+$95,000-$98,800 total amount borrowed.
There are tiers for the amount you will pay in premium and this is set by CMHC and are subject to change at any time. The best bet is it ask your broker what the current tiers are, so you have the most up to date information.
5% Down – 4.00% Premium
10% Down – 3.10% Premium
15% Down – 2.80% Premium
Of course, there are exceptions to every rule and higher premiums can apply to our self-employed friends who are unable to provide traditional income verification.
Did you know there are actually 3 companies that provide default insurance, not just CMHC? Well there are: Canadian Mortgage and Housing Company (CMHC), Genworth Canada (GE) and Canada Guaranty (CG). They are all watched carefully by the powers that be so you as a consumer are safe with any of them. This trio of companies each has certain products they allow so more Canadians can get into the housing market. If a homeowner finds them self in a tough situation where they are unable to make their mortgage payments, each of the insurers has a program to help them stay in their homes. Best bet is always to call your broker with any of your questions.
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