CMHC default mortgage insurance

Common questions about default mortgage insurance

• When is CMHC default mortgage insurance mandatory?

  Whenever the loan is more than 80% of the home's value, which means a down payment under 20%. Under the Bank Act a bank cannot lend above 80% unless the excess is insured by a government agency or a private insurer the federal regulator approves. CMHC (Canada Mortgage and Housing Corporation) is the Crown corporation that insures such loans. The premium is a percentage of the loan, and the lender usually passes it on to you. CMHC says provincial sales tax applies to premiums in Quebec, Ontario and Saskatchewan. BC is not on that list. Source: Justice Laws, Bank Act, section 418 (laws-lois.justice.gc.ca); CMHC, Mortgage loan insurance costs (cmhc-schl.gc.ca).
• What is the maximum purchase price eligible for CMHC insurance?

  Under $1,500,000. The federal government raised the cap from $1,000,000 on December 15, 2024. CMHC's product pages say the price must be below $1,500,000. On an eligible home of one or two units you need 5% down on the first $500,000 and 10% on the rest. At $1,450,000 that is $120,000. At $1,500,000 or more the insurance is unavailable and you need 20% down, which is $300,000 at $1,500,000. Source: Department of Finance Canada, September 16, 2024 release (canada.ca); CMHC, Homeowner and Small Rental Mortgage Loan Insurance (cmhc-schl.gc.ca).
• How is the CMHC premium calculated?

  It is a percentage of the loan, set by the loan-to-value ratio. At 90.01% to 95% the premium is 4.00%. At 85.01% to 90% it is 3.10%. At 80.01% to 85% it is 2.80%. CMHC adds the premium to the mortgage if the lender agrees. For example, a $790,000 loan on an $850,000 home has a loan-to-value of 92.9%, so the premium is 4.00%, or $31,600. The mortgage becomes $821,600. Your lender gives you the exact price when you apply. Source: CMHC, Mortgage loan insurance costs (cmhc-schl.gc.ca).
• Who qualifies for 30-year amortization?

  A first-time buyer buying any home, or any buyer buying a newly built home that has never been lived in. Both rules took effect December 15, 2024. The home must be owner-occupied. CMHC insures these loans under its Home Start product, and the premium is 0.20 points higher: 4.20% instead of 4.00% at 90.01% to 95% loan-to-value. A 30-year payment is about 7% to 10% lower than a 25-year payment at rates between 6% and 4%, and you pay more interest in total. Source: Department of Finance Canada, September 16, 2024 release (canada.ca); CMHC Home Start (cmhc-schl.gc.ca).

  CMHC defines a first-time buyer as someone who has never purchased a home in Canada, or has not lived in a home they or their spouse owned in the current calendar year or the four before it. A buyer of a resale home who has owned before is limited to 25 years. For a condominium, "newly built" allows interim occupancy before the condominium declaration is registered. Source: CMHC Home Start (cmhc-schl.gc.ca).
• Does the OSFI stress test apply to CMHC-insured mortgages?

  Yes. You must qualify at the greater of your contract rate plus 2 percentage points, or 5.25%. The 5.25% floor is set by the federal bank regulator, the Office of the Superintendent of Financial Institutions (OSFI), and is not a Bank of Canada rate. At a 5.0% contract rate you qualify at 7.0%. At 2.5% you qualify at 5.25%. Renewing with your existing lender never needed the test. Since November 21, 2024 an uninsured borrower can also switch to a new federally regulated lender at renewal without it, if the loan does not grow and the amortization is not extended. Insured borrowers already had that relief. Source: OSFI, Minimum qualifying rate for uninsured mortgages (osfi-bsif.gc.ca).
• Can I get the CMHC premium back if I refinance or break the mortgage?

  Not in general. CMHC's cost page describes one refund: up to 25% of the premium when the insurance finances an energy-efficient home. It describes no refund when you sell, refinance or break the mortgage. Portability lets you move the insurance to a new home, with a rate on any increase in the loan. Ask your lender about portability before you break a mortgage. Source: CMHC, Mortgage loan insurance costs (cmhc-schl.gc.ca).
• Does the CMHC premium count toward the down payment minimum?

  No. The minimum is worked out on the purchase price, and the premium is added to the loan afterwards. Example: on a $1,000,000 home the minimum down payment is $25,000 plus $50,000, which is $75,000. The loan is $925,000, a loan-to-value of 92.5%, so the premium is 4.00%, or $37,000. The mortgage becomes $962,000, and your payments are calculated on that amount. Source: CMHC, Homeowner and Small Rental Mortgage Loan Insurance and Mortgage loan insurance costs (cmhc-schl.gc.ca).