What is CMHC high ratio mortgage insurance?

Why do I need CMHC ratio mortgage insurance?

It’s amazing how many times I hear different references all for CMHC high ratio mortgage insurance.

The Canadian Mortgage & Housing Corporation.

SO what is CMHC (Canadian Mortgage and Housing Corporation) high ratio insurance and why do you need them?

Well, lets start by saying, you don’t really need them the bank does.
You see, many moons ago it was illegal to provide a mortgage in Canada without having at least 25% down payment. Well that’s since changed to 20% down, but the bottom line is, in Canada it’s illegal for a bank to provide a mortgage unless they have 20% down payment.

Of course we all know you can buy a home with less than 20% down, even zero down, but here’s the catch.

By law, the mortgage MUST be insured with CMHC high ratio mortgage insurance
That insurance is called High Ratio Mortgage Insurance.
In a nutshell, it protects the bank in the event that you default.
Now, the cost of the high ratio mortgage insurance depends on the amount of your down payment.

The less you put down, the higher the high ratio mortgage insurance.

As I mentioned earlier, if you put 20% down payment or more, you do mot need CMHC high ratio mortgage insurance. If you put less than 20% down payment, you must pay the CMHC high ratio mortgage insurance and it’s added to the top of your mortgage.

For example, if you purchase a home for $500,000 and you put 20% down payment, or one hundred thousand, there’s no CMHC high ratio mortgage isurance added to your mortgage.

It’s simply the difference between the purchase price and your down payment.
So in this example, the mortgage would be for four hundred thousand.

Now if you purchase that same house for five hundred thousand, but you put 10% down payment, or fifty thousand, then the mortgage is the difference, four hundred & fifty thousand, plus a 2% CMHC high ratio mortgage insurance fee, or $9,000. So the actual mortgage now becomes four hundred & fifty nine thousand.

There’s a lot more to mortgages that just great rates.

For the right advice at the right time

Go ahead and call me to discuss

Mark Fidgett, Your Vancouver Mortgage Broker For Life



P.S. Who’s the next person you know who wants to save thousands off their mortgage?
Be sure to give me a call so we can help them!