CMHC Insurance Premium

CMHC (Canadian Mortgage and Housing Corporation) insurance premium allows first time and experienced home buyers an opportunity to qualify for their dream home. It allows you to get a loan of up to 95% of the total purchase price of your home while protecting lenders in the event you aren’t able to make your payments. Without having a 20% down payment, a buyer is required to have mortgage default insurance.

Who provides mortgage default insurance?

We know mortgage default insurance is required on all down payments of less than 20%, but who provides this insurance?

In Canada, there are three mortgage default insurance providers: CMHC, Genworth Financial and Canada Guaranty. Your banking institution will select which insurance provide they use for your home transaction.

Let’s look at the facts.

Buying your first home is a big deal. According to Statista, the average cost of a traditional single family home in Alberta this year is approximately $376,600. In this scenario, by using mortgage default insurance, a buyer would only need to come up with $18,830 or 5% of the total home cost. In comparison, a buyer would need to come up with $75,320 or 20% of the total home cost if they do not use mortgage default insurance.

Changes to CMHC guidelines in 2020

CMHC recently announced changes to its coverage criteria for insured mortgages. The changes announced by CMHC that took effect on July 1, 2020 are likely to make it more difficult for home buyers to purchase a new home with down payments of less than 20%.

The following changes now apply for all new applications that require mortgage insurance through CMHC.

Gross debt service (GDS) ratios must be under 35, down from 39
Total debt service (TDS) ratios must be under 42, down from 44
Borrower’s credit score must be at least 680, up from 600
Borrowed down payments are no longer permitted

Lenders can still choose to insure mortgages through private default insurance providers such as Canada Guaranty and Genworth Financial. These two default insurance providers have opted to not follow suit of CMHC’s changes effective July 1, 2020 leaving a question of how banks are going to respond to CMHC changes.

Learn more about the impact on home buyers here.

View New CHMC Rules

Does CMHC and other mortgage default insurance apply to modular homes?

You may think that CMHC insurance only applies to traditional single-family homes. However, mortgage default insurance is available on multiple property types including duplexes, condominiums and manufactured or modular homes.

What does that mean for my Jandel home?

Consider the above example where we went over the average cost of a traditional single-family home in Alberta exceeding $370,000.

Our homes are priced from the $200s, with homes in our award-winning community Meadows of Morinville priced from $170,000.

Under the CMHC requirements of having a 5% down payment, a customer purchasing a $170,000 detached single-family home would only need $8,500. Modular housing provides an opportunity for our customers to save money without sacrificing on quality of life.