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CANADA MORTGAGE AND HOUSING CORPORATION
 

Important Notice

As of February 15, 2016, the minimum down payment requirement for mortgage loan insurance depends on the purchase price of the home. For a purchase price (or lending value) of $500,000 or less, the minimum down payment is 5%. When the purchase price (or lending value) is above $500,000, the minimum down payment, as a percentage of lending value, is 5% for the first $500,000 and 10% for the remaining portion.

Example:

For a home with a purchase price (or lending value) of $600,000, the minimum down payment required is:

= 5% of $500,000 + 10% of $100,000
= $25,000 + $10,000
= $35,000

CMHC Improvement When Purchasing a Home

15 minutes | 0.25 CE | Highlight Sheet (PDF)*
*Viewing of all materials is required to claim your CE credit."

CMHC Improvement for When Purchasing a Home

Introduction Slide

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(Visual) Text: The CLASSROOM for Mortgage Professionals. Free training and webinars to expand your expertise

Slide 1

(Visual) Header Text: Canada Mortgage and Housing Corporation, Mortgage Loan Insurance

(Visual) Title: CMHC Improvement When Purchasing a Home

(Visual) Footer: Everything you need to open new doors, Canada Mortgage and Housing Corporation Logo with Home to Canadians tagline and Canada Wordmark

CMHC offers a variety of innovative mortgage loan insurance products to help you meet your client’s home financing needs.

This presentation provides you with information on CMHC Improvement when purchasing a home and includes an overview of the product features and eligibility requirements.

Slide 2

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(Visual) Footer: www.Everythingyouneed.ca and Canada Mortgage and Housing Corporation Logo with Home to Canadians tagline are used throughout the presentation

When contemplating homeownership, many of your clients may be considering the purchase of an existing home.

While an existing home can offer many advantages, in some cases, the home cannot meet all the purchaser’s current lifestyle needs or choices.

To address this situation, many home buyers will undertake immediate small or large scale home improvements. CMHC can help!

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(Visual) Subtitle Text: What is CMHC Improvement?

CMHC Improvement is a mortgage loan insurance product that has been designed to assist Mortgage Professionals in offering greater financing choice and options for borrowers who are purchasing an existing home and undertaking small or large scale improvements to the property.

This product enables your customers to purchase an existing home and make improvements in one easy application process, saving you and your customer time and money.

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(Visual) Subtitle Text: Features

Purchase financing of up to 95 percent of a home’s lending value is available for properties of 1 to 2 residential units, and up to 90 percent for properties with 3 to 4 residential units.

The maximum loan-to-value ratio is based on the property’s as-improved value.

Financing flexibilities are available including insured advances during the improvement period and amortization periods of up to 25 years.

Slide 5

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(Visual) Subtitle Text: Borrower Eligibility

CMHC Improvement is available for permanent residents, including newcomers to Canada and self-employed borrowers.

CMHC homeowner mortgage loan insurance is available to a maximum of one property per borrower or co-borrower at any given time.

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(Visual) Subtitle Text: General Property Requirements

This product is available for one to four unit properties located anywhere in Canada, from coast-to-coast-to-coast.

The property must be suitable for, and available for, full time year-round occupancy.

Lenders must confirm owner occupancy and maintain the confirmation on file. The lender may obtain a verbal or written confirmation from the borrower and retain the confirmation in any format that the lender deems prudent.

Properties that are constructed for seasonal use, or have seasonal access, are not eligible.

The maximum as-improved property value for loans must be below $1,000,000.

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(Visual) Subtitle Text: As-improved value

The as-improved value is based upon the lender’s estimate of the property’s value, once the improvements are completed.

The down payment requirements and maximum loan amount are based on as-improved value.

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(Visual) Subtitle Text: Advancing Options

CMHC Improvement provides for insured advancing during the home improvement period. Advancing flexibilities are available for both small scale and large scale improvements.

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(Visual) Subtitle Text: Small Scale Improvements

Small scale improvements are defined as improvements where the increase to the market value of the property is less than or equal to 10 percent of the as-improved market value.

Once the application is approved by CMHC, funds can be advanced during the improvement period by the lender, without requiring further CMHC authorization for each advance.

This approach makes it easy for you to provide your clients with the funds they need during the improvement period.

Slide 10

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(Visual) Subtitle Text: Large Scale Improvements

CMHC’s advancing choices for large scale renovations provide flexible advancing choices for you and help to protect against the funding of unfinished construction projects.

For large scale improvements, where the increase in value is greater than 10 percent of the as-improved market value, CMHC provides you with advancing choice, helping to meet your clients financing needs during the improvement period.

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(Visual) Subtitle Text: Large Scale Improvements, Basic Service emili Advancing

For example, once the initial application has been approved for mortgage loan insurance by CMHC, our basic service emili advancing option permits the lender to determine the stage of the construction reached and reasonableness of the advance amount by following their respective internal policies and procedures, without consultation or pre-approval from CMHC. Each advance is backed by the quality of CMHC Mortgage Loan Insurance.

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(Visual) Subtitle Text: Large Scale Improvements, Full Service emili Advancing

With our full service emili advancing option, CMHC makes the process simple and easy for you.

Through this option, CMHC will manage up to four advancing validations, which include validating the amount of construction completed, and the percentage of funds that can be released, at no additional cost.

For five or more advances, lenders can choose for CMHC to manage the additional validations at the lender’s expense.

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(Visual) Subtitle Text: History of Managing Credit

Borrowers must have an established credit history. The general guidelines for the history of managing credit are as follows:

  • Where the loan-to-value ratio is greater than 80 percent, the recommended minimum credit score is 600.
  • Where the loan-to-value ratio is between 60.01 percent and 80 percent, the recommended minimum credit score is 580; and
  • Where the loan-to-value ratio is less than or equal to 60 percent, no minimum credit score is required.

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(Visual) Subtitle Text: Debt Service Guidelines, Credit Score: GDS/TDS

CMHC normally restricts debt service ratios to 35% (GDS) and 42% (TDS). For borrowers with credit scores over 680, GDS and TDS ratios above 35% and 42% may be considered, but the absolute maximum will be 39% for GDS ratio and 44% for TDS ratio.

Satisfying the minimum 680 credit score alone does not automatically entitle the borrower to debt service flexibilities. The availability of these flexibilities is based on an assessment of the strength of the overall application.

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(Visual) Header Text: CMHC Improvement When Purchasing a Home

This table provides you with information on the applicable premium rates for CMHC mortgage loan insurance.

The premium payable is based on the percentage of the property’s lending value that is being financed by a mortgage. For purchase transactions, the premium payable is the premium on the total loan amount.

The premium is due and payable to CMHC as the insured loan is advanced. If the lender is passing the cost of the CMHC mortgage loan insurance premium along to the borrower, the premium can be paid in a single lump sum or it can be added to the mortgage and amortized over the life of the loan.

(Visual): A table shows CMHC mortgage loan insurance premiums for owner-occupied properties based on applicable loan-to-value ratios, as follows:

  • For loan-to-value ratios of up to and including 65%, the premium on the total loan amount is 0.60%
  • For loan-to-value ratios of up to and including 75%, the premium on the total loan amount is 0.75%
  • For loan-to-value ratios of up to and including 80%, the premium on the total loan amount is 1.25%
  • For loan-to-value ratios of up to and including 85%, the premium on the total loan amount is 1.80%
  • For loan-to-value ratios of up to and including 90%, the premium on the total loan amount is 2.40%
  • For loan-to-value ratios of up to and including 95% for traditional down payment, the premium on the total loan amount is 3.60%
  • For loan-to-value ratios of up to and including 95% for non-traditional down payment, the premium on the total loan amount is 3.85%

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(Visual) Header Text: CMHC Green Home

(Visual) Subtitle Text: Energy-efficiency is top of mind for your clients

Energy-efficiency is top of mind for your clients.

CMHC can help to make energy-efficient housing choices more affordable for your clients by offering mortgage loan insurance premium refunds for homeowners who purchase an energy-efficient home or make energy-saving renovations to an existing home.

To learn more, visit www.everythingyouneed.ca or ask your CMHC Business Development Representative about CMHC Green Home.

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(Visual) Subtitle Text: Benefits for Mortgage Professionals

Let’s recap some of the benefits of CMHC Improvement when purchasing a home as it relates to you, the Mortgage Professional.

With CMHC mortgage loan insurance, you can offer your clients several flexible and affordable financing options to facilitate your client’s purchase and home renovation.

CMHC Improvement can be adapted to meet the specific financing needs of your clients.

This product can be used for small or large scale improvements – where the improvements result in an increase to the lending value of the home.

Your ability to offer these financing choices helps you to grow your business and build long term client relationships.

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(Visual) Subtitle Text: Need Help?

If you have questions about CMHC Improvement when purchasing a home, or any other CMHC mortgage loan insurance product, it’s reassuring to know that CMHC is just a phone call away.

Call our 1-888 GO emili line. Our bilingual Client Service Agents and Residential Underwriters have the skills and the expertise to ensure your questions will be answered quickly and efficiently.

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For more than 65 years, CMHC has shared a wealth of knowledge, housing expertise, tools and guidance to help Mortgage Professionals stay informed and become trusted advisors to their clients.

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CMHC. Everything you need to open new doors

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(Visual) Disclaimer: CMHC is making the information contained in this presentation available for general information purposes only. It is intended to provide highlights of CMHC products to assist Approved Lenders in understanding CMHC’s current requirements. Lenders using the information should be aware that other conditions, requirements and restrictions may apply and that the information is subject to change without notice. The information is provided without warranty and it is not intended that Lenders or other readers will rely on this information without verifying the full terms of CMHC underwriting policies.

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