What is CMHC

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Have Questions About Mortgage Insurance in Canada?  

1. What is mortgage loan insurance?
Mortgage loan insurance, like any other form of insurance, reimburses the insured entity in case of loss. In the case of mortgage loan insurance, the insured is the lending institution. If a borrower defaults on the mortgage, the mortgage loan insurance will cover the loss to the lender.

2. Why do we need mortgage loan insurance?
According to federal legislation, a lending institution cannot lend more than 80% of the value of a property, by way of a mortgage loan, unless the loan is insured. Since it is the public’s money that is being used for these loans, the government wants to ensure that the funds are not placed at undue risk.

From a borrower perspective, mortgage loan insurance allows for the general public to borrow up to 95% of the value of their home by way of a mortgage. The only criteria for the minimum 5% down payment is that the home has to be owner-occupied and cannot be rented out. Rental properties can be insured but are treated differently.

Mortgage loan insurance also allows borrowers to obtain a “high ratio mortgage” - or one with less than a 20% down payment - at low interest rates. Without mortgage loan insurance, if you only had a limited amount of cash for a down payment, you would have to seek 80% of the value of the home by way of a first mortgage and the balance of funds by way of a second mortgage. A second mortgage is a much riskier investment from a lender’s perspective and therefore a higher risk premium is attached to the interest rate.

3. Who provides mortgage loan insurance?
There are three insurers in Canada - Canada Mortgage and Housing Corporation (CMHC), Genworth, and Canada Guarantee (formerly AIG United Guarantee).  There is very little difference between the three. Because their policies frequently change, you should consult with your mortgage professional to determine the best insurer for you. Typically, the lender will decide which insurer they prefer, unless you request otherwise.

4. Cost of mortgage loan insurance
Mortgage Insurance premiums may vary from insurer to insurer. The table below outlines the cost of the insurance premium based on down payment and length of amortization. Below is a table outlining the insurance premiums depending on the amount of financing required.

Up to 65.00% of property value:


65.01 - 75.00% of property value:


75.01 - 80.00% of property value:


80.01 - 85.00% of property value:


85.01 - 90.00% of property value:


90.01 - 95.00% of property value:


95% LTV Cash Back Mortgage:


* A .20% premium surcharge will be applied for every 5 years of amortization beyond the traditional 25 - year mortgage

The insurance premium may be paid out up front or may be included in the mortgage amount. The following example shows how an insurance premium is added to the mortgage.

Purchase price:


5% down payment:


Financing required:


2.75% insurance premium:


Total mortgage (including premium)


To see the latest Mortgage Interest Rates and find out what you qualify for please visit our Rates Page

Reference and information provided by Axiom Mortgage Solutions