CMHC Insurance Premiums
CMHC insurance premiums (or Genworth and Canada Guaranty) are a default insurance used by mortgage lenders to protect their investment. Not from a fire or vandal, but rather should the mortgage go into foreclosure. The insurance is added onto your mortgage at time of closing, and there is no benefit to the client for this insurance. This insurance was set up to encourage banks to lend money to clients for homes with very little money down. Here is a chart of the fees that CMHC charges based on the different levels of down payments.
|Loan to Value||Premium (New)||Premium (Top-Ups)|
|65.01% - 75%||1.70%||2.60%|
|75.01% - 80%||2.40%||3.15%|
|80.01% - 85%||2.80%||4.00%|
|85.01% - 90%||3.10%||4.90%|
|90.01% - 95%||4.00%||4.90%|
|Non Traditional Down Payment 90.01% - 95%||4.50%||N/A|
How to Decrease or Eliminate Your CMHC Fees
Please keep in mind that these CMHC insurance premiums are not paid out of pocket, they are added to your final mortgage amount and will be paid off over the life of your mortgage. They are a necessary evil for nearly every first time buyer (anyone buying with less than 20% down), so consider it a cost of doing business. These fees are standard across the board, and there is no negotiation or waiving the fees. They may even be required by some lending institutions if you have more than 20% down, depending on special circumstances surrounding the property. These fees are only applicable on our best rate mortgages, not private financing or sub-prime loans.
By putting down more down payment, you can reduce your premiums. At 10% the amount of insurance charged is less than it is at 5%, and so on all the way up to 20%. At 20% down payment, there are no CMHC insurance premiums charged unless there are special circumstances. One such circumstance could be a property in a small or remote location.
By talking to a professional mortgage broker, you will understand why these premiums apply and how much they will cost you.
|Average Amortization Period at Origination (transactional homeowner)||26.7 years|
|Average Insured Loan Amount||$174,163|
|Average Loan-to-Value (LTV) Based on Updated Property Value2(transactional homeowner and portfolio)||53.2%|
|Average Credit Score at Origination (transactional homeowner)||734|
|Average Borrower GDS at Origination (transactional homeowner)||23.7%|
1 Overall, for all insurance products, unless otherwise noted.
2 LTV calculated on the basis of updated property values reflecting changes in local resale prices
*Images Courtesy of CMHC
Requirements for CMHC Insurance
- Home must be located in Canada.
- Value of home must be under $1,000,000.
- Minimum down payment is 5% up to $500,000. On values over $500,000, down payment will be 5% for the first $500,000 and 10% on total dollars over $500,000.
- All applicants must have a credit score of 600 minimum.
- Gross debt service ratio max is 35% for credit scores under 680, and 39% over 680.
- Total debt service ratio max is 42% for credit scores under 680, and 44% over 680.
- Closing costs require client to have 1.5% of the purchase amount.
These are general guidelines and simply meeting the minimum does not guarantee approval. Credit scores are not always a great indicative of a clients willingness to pay.