High Ratio Mortgages
Every mortgage in Canada with a down payment of less than 20%* is subject to mortgage default insurance, offered by three companies: Canada Mortgage and Housing Corporation (CMHC), Genworth and Canada Guaranty, any one of which could be insuring your mortgage.
All three insure mortgages at the same premium levels. This is sometimes referred to as high-ratio mortgage insurance.
This insurance doesn’t protect you – it protects the lender (your financial institution). The government promotes this “default insurance” to prevent a sudden surge in home foreclosures from destroying the Canadian economy.
When you think about what a 5% down payment actually means – that you’ve borrowed 19x the amount of money you had – you can see why lenders need to be protected from that sort of risk. The insurance premium for this mandatory insurance is added on to your mortgage. You can figure out how much will get tacked on by using our calculator.
The amount of the insurance premium is primarily based on what percentage of the purchase price you put down. While the insurance cost itself is usually rolled into your mortgage payments, if you live in Manitoba, Ontario, or Quebec, the provincial taxes on that insurance premium are due separately upon closing the property. This can be a real surprise at a time when money is already likely to be tight.
For example, if you purchase a home for $300,000 and make a 10% down payment, a $7,200 insurance premium will be added to your mortgage. Then, if you live in Ontario where PST is 8%, a further $576 will be due before you get the keys to your new home.
A 10% premium refund may be available when CMHC Mortgage Loan Insurance is used to finance an Energy-Efficient Home. All three mortgage insurers have such programs. Many home buyers are unaware of this and fail to make a claim.
Please note, if you are buying a rental property and/or you are self-employed you may be charged insurance even on a conventional mortgage.
Here is the current table of CMHC insurance premiums
|Loan to Value This is a partial list – refer to CMHC website||Premium on Total Loan||Premium on Increase to Loan Amount for Portability and Refinance|
|80.01% up to and including 85%||1.80%||4.00%*|
|85.01% up to and including 90%||2.40%||4.90%*|
|90.01% up to and including 95%||3.60%||5.65%*|
|90.01% to 95% —
Non-Traditional Down Payment**