When buying a home in Canada, you may need Mortgage Loan Insurance (also known as CMHC Mortgage Loan Insurance, or Mortgage Default Insurance). In this post we discuss what this insurance is and when you’ll need it.
What is Mortgage Loan Insurance?
When buying a home in Canada, if your down payment is less than 20% of the purchase price, you are required to purchase Mortgage Loan Insurance.
When saving to buy a home, you might find a property that you want to buy but you don’t yet have a large enough down payment (or deposit) to avoid paying Mortgage Loan Insurance. If you have less than 20% as a down payment, this doesn’t need to be a barrier to prevent you from buying a property. Many banks in Canada only require a downpayment of 5% of the purchase price, with CMHC Loan Insurance.
You can get mortgage loan insurance which allows you to borrow up to 95% of the purchase price. The minimum down payment you’ll need is 5%. However there are situations where mortgage loan insurance is not applicable, which we discuss further on.
When can I get Mortgage Loan Insurance?
For purchases of properties under $500,000, Mortgage Loan Insurance will be available when you have a minimum down payment of 5% (for example, $25,000 on a purchase price of $500,000).
If the property price is more than $500,000 but less than $1,000,000, you’ll need 5% down payment on the first $500,000 and then 10% on the remainder.
There are other criteria including your credit score and debt service ratio. We suggest speaking to your lender or mortgage broker about these requirements. Your lender or mortgage broker will arrange the insurance and payments.
If the property you’re buying is over $1,000,000, then Mortgage Loan insurance is not available, and you are required to submit the minimum downpayment as outlined by your lender.
What kinds of properties can I get Mortgage Loan Insurance for?
Insurance is available for a range of residential property types. This includes a traditional single-family residential home as well as duplexes, condos, mobile homes and retirement homes.
If you’re purchasing a property and are unsure how Mortgage Loan Insurance affects your situation, speak to One80 Law. We are happy to explain any of your purchase or sale documents and follow up with any questions you may have.
Who provides Mortgage Loan Insurance?
This insurance is provided by Canada Mortgage and Housing Corporation (CMHC Insurance) and is also available from other providers like Genworth Financial Canada and Canada Guaranty.
When you speak to your lender about getting a home loan, mention to them that you’ll need Mortgage Loan Insurance so it can be included in your repayments.
I need more information about buying a home
If you have more questions about buying a home in Alberta or BC, our blog might be able to help.
- First Home Buyer Incentives in British Columbia
- How To Find A Good Real Estate Lawyer In Calgary
- Buying Your First Home Might Be Closer Than You Think