A mortgage involves an agreement between a lender and a borrower where the lender decides to loan the borrower money to purchase property under the condition that the borrower promises to repay the loan and provides that land as security for their payment of the loan; when the loan is repaid in full, the lender will release the property to the borrower.
If the borrower defaults on that loan, the lender may take its security (the property) in order to satisfy the debt owing to it. In the event of a default on that loan, the liability may not be fully satisfied by the sale of the property and the borrower may therefore be responsible for the payment of the shortfall. Mortgages are the primary means by which people finance the purchase or their homes.
2. What can I use as my down payment on my new house?
A CMHC insured mortgage provides you with down payment flexibilities — you can own your home with a minimum down payment starting at 5%.
Some common sources of down payment include personal savings, RRSP withdrawal, non-repayable gift from immediate family members, sale of other property, and funds borrowed against proven assets.
The minimum down payment requirement for mortgage loan insurance depends on the purchase price of the home. For a purchase price of $500,000 or less, the minimum down payment is 5%. When the purchase price is above $500,000, the minimum down payment is 5% for the first $500,000 and 10% for the remaining portion.
3. When does my lender need mortgage loan insurance?
Lenders will require Mortgage Loan Insurance if a borrower has a down payment of less than 20% of the purchase price of the home.
4. Is there a maximum purchase price for CMHC Mortgage Loan Insurance?
Yes, the maximum purchase price/lending value or as-improved property value must be below $1,500,000 for homeowner loans and $1,000,000 for small rental loans.
5. Who arranges CMHC Mortgage Loan Insurance?
Your lender will arrange for the purchase of CMHC Mortgage Loan Insurance. When you negotiate your loan terms make sure to ask that the mortgage be CMHC insured.
To learn more about the different types of mortgages and the process of arranging a mortgage, see our Home buying Step by Step – Step 2. Are You Financially Ready?
6. Does CMHC Mortgage Loan Insurance only apply to traditional single-family residential properties?
No, CMHC offers Mortgage Loan Insurance products on various property types including duplexes, condominiums, manufactured or mobile homes and many more, including rental and retirement homes. Please check with your lender for more details.
7. Who pays for the CMHC Mortgage Loan Insurance?
Like any other kind of insurance, there are premiums to be paid. The lender typically passes on the cost of insurance to the borrower. The premiums can be paid up front in a lump sum or blended in with your mortgage loan payments.
8. My mortgage is currently CMHC-insured and I am moving to another house. Are there any CMHC products available to me?
When a lender has received CMHC Mortgage Loan Insurance on your home loan on or after April 1, 1996 and you are purchasing another home, there may be a mortgage portability option. Portability allows a repeat user of CMHC insured mortgage financing to save money by reducing or eliminating the premium on a new insured loan for the purchase of another home. Please check with your lender for the terms and conditions of mortgage portability.
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