What is CMHC mortgage loan insurance?
Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protects lenders against mortgage default, and enables consumers to purchase homes with little or no down payment — with interest rates comparable to those with a 20% down payment. As with any insurance, there are insurance premiums to be paid. The amount of the premium varies and can range between 0.65% and 2.75% depending upon how much of the purchase price/home value is financed with a mortgage loan. Mortgage loan insurance is not to be confused with mortgage life insurance which guarantees that your remaining mortgage at the time of your death will not be a burden to your estate.
CMHC insures the mortgage loan for the lender. Should the buyer go into default, CMHC would take over the property as a foreclosure and reimburse the lender. CMHC charges insurance fees that are a percentage of the mortgage. If a 25% down-payment is applied to the purchase of the home, CMHC mortgage insurance is not needed.
