CMHC Mortgage Default Insurance Calculator

The Canada Mortgage and Housing Corporation (CMHC) has recently implemented several significant changes to its mortgage insurance policies to enhance housing affordability and accessibility for Canadians.

1. Increased Mortgage Insurance Cap and Extended Amortization for First-Time Buyers

Effective December 14, 2024, the federal government has raised the maximum price for CMHC-insured mortgages from $1 million to $1.5 million. This change allows buyers to purchase homes valued up to $1.5 million with a minimum down payment of 5% for the first $500,000 and 10% for the remaining amount. Consequently, a home priced at $1.5 million would require a down payment of $125,000, compared to the previous requirement of $300,000. Additionally, the government has expanded 30-year amortization periods to all first-time homebuyers, reducing monthly mortgage payments and making homeownership more attainable.

2. Support for Adding Secondary Suites

Starting January 15, 2025, CMHC will offer insured mortgage refinancing options to homeowners aiming to add secondary suites to their properties. This initiative encourages densification and provides homeowners, including seniors, with opportunities to generate additional income by creating rental units.

3. Introduction of CMHC Home Start Program

As of August 1, 2024, CMHC’s Home Start program provides mortgage loan insurance to first-time homebuyers purchasing newly constructed homes with 30-year amortization periods. This measure aims to lower monthly payments and increase affordability for new homeowners.

These reforms are part of the federal government’s broader strategy to build nearly 4 million new homes, marking the most ambitious housing plan in Canadian history. The initiatives aim to make homeownership more accessible and affordable for Canadians.

For more detailed information on these changes and how they may affect your homeownership plans, it’s advisable to consult with a mortgage professional or visit the official CMHC website.

The Canada Mortgage and Housing Corporation (CMHC) provides mortgage loan insurance for homebuyers in Canada. This insurance protects lenders if borrowers default on their mortgage payments. CMHC insurance allows homebuyers to obtain mortgage financing with a lower down payment, typically less than 20% of the purchase price of the home.

Here are some key points about CMHC insurance in Canada:

1. Purpose: CMHC insurance helps make homeownership more accessible to Canadians by allowing borrowers to purchase homes with a lower down payment. This is particularly beneficial for first-time homebuyers who may not have a large amount of savings for a down payment.

2. Mandatory for High-Ratio Mortgages: If a homebuyer is unable to make a down payment of at least 20% of the purchase price, they are required to obtain mortgage loan insurance. Mortgages with a down payment of less than 20% are referred to as high-ratio mortgages.

3. Premiums: CMHC insurance premiums are based on the loan-to-value ratio (LTV) of the mortgage, which is the ratio of the loan amount to the appraised value of the property. The higher the LTV ratio, the higher the insurance premium. Premiums can be paid upfront or added to the mortgage amount.

4. Coverage: CMHC insurance covers the lender in case the borrower defaults on the mortgage and the proceeds from the sale of the property are not sufficient to cover the outstanding loan balance. This insurance does not protect the borrower; it solely protects the lender.

5. Eligibility: To qualify for CMHC insurance, borrowers must meet certain criteria set by CMHC, including creditworthiness and property eligibility requirements. Borrowers typically need to undergo a mortgage approval process with their lender, who then arranges the CMHC insurance if required.

6. Other Providers: While CMHC is the largest provider of mortgage loan insurance in Canada, there are also two other private mortgage insurers: Genworth Canada and Canada Guaranty. These private insurers offer similar mortgage insurance products and operate under regulations similar to CMHC.

Overall, CMHC insurance plays a significant role in the Canadian housing market by facilitating homeownership for many Canadians, particularly those who may not have a large down payment saved. It’s important for homebuyers to understand the terms and conditions of CMHC insurance and how it affects their mortgage financing.