Description

• Mortgage loan insurance is required by lenders where the home buyer makes a down payment of less than 20% of the purchase price.
• With a 5% minimum down payment, you can have up to a 95% mortgage insured by CMHC for the purchase of a home (with there being no cap on house prices which are eligible for CMHC high ratio mortgages)
• Effective October 15, 2008, there will no longer be any more new CMHC 100% guaranteed mortgages (CMHC Flex 100 program). All mortgages will require the 5% down payment and will only be insured up to a maximum of 95%.
• Where the home buyer requires assistance with the down payment, a gift of the down payment from an immediate relative is acceptable (for dwellings of 1 to 4 units)
• As of March 1, 2004, purchasers can access CMHC’s new Flex-Down product, where CHMC will insure the mortgage even if the 5% down payment is borrowed through a line of credit or credit card, rather than coming from personal savings (ie the purchaser can use sources for borrowing the initial down payment which were previously restricted, such as loans, credit cards, cash-back incentives from the vendor, and loans from parents).
• The Flex-Down product allows the option of also borrowing up to 1.5% of the purchase price to cover closing costs, but if closing costs are borrowed, then any associated payment is to be included in the “total debt servicing” calculation, based on a 12 month repayment period
• CMHC Insured Line of Credit allows lenders to provide a homebuyer with access to up to 90% of the homes value at the time of purchase. Funds can be drawn as often as needed (up to the maximum credit limit) and you can prepay without penalty over the life of the loan, which may be up to 25 years.
• Note that any borrowed down payment is not insured by CMHC, and payments made for the borrowed down payment are factored into the total debt ratio (so that purchasers must take into account how a new loan or other credit will affect their monthly costs)
• The minimum term of the mortgage being insured by CMHC is 6 months.
• As of October 15, 2008, the maximum amortization period for a CMHC insured mortgage is 35 years.

• With a 5% down payment or Flex- Down product, the borrower must be buying a single-family dwelling in Canada as a principal residence (i.e. primary place of residence); with a 7.5% down payment, the borrower can purchase a 2-unit property (one unit must be the borrower’s principal residence); with a 10% down payment, the borrower can purchase a 4-unit property (one unit must be the borrower’s principal residence)
• Each financial institution may have its own supplementary income/credit requirements; CMHC requires established credit and job security
• Effective October 15, 2008, the minimum credit score for a CMHC insured mortgagor will be 620. There will be limited exceptions for borrowers with a credit score lower than 620 who pose a low risk of default.
• Also effective October 15, 2008, all borrowers will be permitted a maximum of 45% total debt service (debt service is the proportion of an individual’s gross income which is devoted to paying debts and other fixed or essential housing- related payments)
• If you are purchasing a home (or condominium unit) as an investment, there is a minimum requirement of a 15% down payment in order to obtain CMHC mortgage insurance; different insurance premiums also apply
• CMHC’s minimum credit requirements for eligibility for the Flex-Down product is a 680 credit “beacon” score

• Effective September 22, 2003, price ceilings for all homeowner and rental investor mortgage loans were eliminated
• Can be a new or re-sale home
• Project must qualify under CMHC environmental site assessment (for new condominium projects where the purchaser is planning to purchase or construct the whole condominium)

• Payments of the principal, interest, property taxes, heating and 50% of the condo fees cannot exceed 32% of your gross household income
• Total monthly debt load cannot exceed 40% of your gross monthly household income
• For a 95% mortgage, buyers must prove they have at least 5% down payment from their own resources;
• For a 95% or Flex-Down mortgage, all or part of the down payment may be a gift from any party not related to the purchase and sale transaction, but the money must be gifted with appropriate evidence before submitting the CMHC application.
• Buyer must also show ability to cover closing costs of at least 1.5% of the purchase price; closing costs can be borrowed over a one year period (maximum), and repayment of that amount is factored into the borrower’s debt service ratio

Mortgage loan insurance premiums (homeowners):

Mortgage loan insurance premiums (rental investors):

- Application fees range from $75.00 to $235.00; $600.00 for rental investors plus an appraisal of the property must be completed.

Website

- More information at: CMHC's website at http://www.cmhc.ca