CMHC stands for the ‘Canadian Housing and Mortgage Corporation’ and enables Canadians to put less than 20% down payment on their home purchase. In return for an ‘insurance premium’ paid by the borrower, the CMHC mortgage insurance assumes the added risk that stems from this lower down payment.
Cost of the CMHC Premium
The fee varies on the amount of down payment, and the CMHC mortgage insurance fee or ‘premium’ is added directly into the mortgage itself. So the CMHC premium is not an upfront fee or closing cost that you have to pay.
|Down Payment||CMHC Premium|
|20% (or 80% Loan to Value)||Typically no Premium|
|15% (or 85% Loan to Value)||1.80%|
|10% (or 90% Loan to Value)||2.40%|
|5% (or 95% Loan to Value)||3.60%|
|0% (Loaned Down Payment)||3.85%|
As you can see from the pricing table, the larger the down payment, the lower the cmhc mortgage insurance premium added into the mortgage. Remember – the CMHC fee is taken as a % of the mortgage amount applied for.
Calculate the CMHC fee on a $100,000 purchase price with a 10% down payment mortgage.
- $100,000 (purchase price) – $10,000 (down payment) = $90,000 mortgage needed.
- $90,000 mortgage with 10% down is a 2.40% CMHC fee.
- $90,000 * 2.4% = $2,160 CMHC fee.
- CMHC Fee is added into the mortgage:$92,160 is the resulting mortgage that payments are made on in this case.
These steps can be applied to any kind of mortgage where CMHC is required, keeping in mind how the fee changes depending on the % of down payment.
Please note if you plan on using a gifted down payment – you will pay less premium (regular premium) than if your down payment is loaned.
Different kinds of Insurance
CMHC insurance is sometimes called ‘mortgage insurance’ and can easily be confused with Fire insurance or Mortgage Life Insurance. These types of insurance are completely different from CMHC insurance, and while Fire or home insurance is required for all home owners with a mortgage – Mortgage Life insurance is completely optional.
|Type of Insurance||Why it’s Needed|
|CMHC Mortgage Insurance||Under 20% down payment.|
|Home/ Fire Insurance||In case of fire or other disaster.|
|Mortgage Life Insurance||In case of death, mortgage is paid.|
Many mortgage shoppers are aware that higher credits score can help ensure the lowest rate. But is this the only factor out there that can help to lower your rate? The truth is that there are other factors involved, but fewer have heard about them. The following chart summarizes some of the other ways that lenders are able to lower their rate to the furthest possible reaches.
|# of days until closing||The fewer number of days until your close, the lower the rate can potentially be. If you have 60 or even 30 days before your close, we can usually – but not always – find you a lower rate than if you have 120 days until close.|
|If the mortgage is CMHC insured||Because a lender has less risk involved in a CMHC insured mortgage, they are often – but not always – able to offer an even lower rate.|
|Mortgage Features and Fine Print||Some of the ‘bargain basement’ mortgage rate specials in the market come with high penalties or ‘closed features’ if the mortgage is completely paid out before the term is up. As long as you, the client, are OK with the fine print, this can lead to a lower rate.|
|Mortgage Type||Weather the mortgage is for a purchase, refinance, renewal or for a rental property – this can affect the rate. It’s a good idea to ensure the rate special you have is guaranteed for the type of mortgage transaction you are involved with.|
Essentially, any way that a lender can find to lower their costs of doing business, can be passed on to you in the form of a lower rate.
Asa Broker, Altrua mortgage only accepts a standard flat fee from lenders, no matter what the mortgage size, # of days until closing, mortgage features or type. The remainder of the commission lenders pay to Altrua is invested in to lowering your rate. This business model is unique in the Canadian mortgage market, and it makes Altrua 100% unbiased, because there is no difference in what Altrua earns on the mortgage you choose. Altrua is 100% transparent, and customer focused. And this, along with mortgage empowerment and guidance, help you save the most.