CMHC Mortgage Insurance Calculator

What is the CMHC Mortgage Insurance Calculator?

In Canada, you are required to have mortgage default insurance if your down payment is less than 20%, but what is it and how much does it cost? The Hardbacon CMHC Mortgage Insurance Calculator shows you the true cost of CMHC Mortgage Insurance so you can provide a down payment that makes the most sense for your financial situation.

With the Hardbacon CMHC Mortgage Insurance Calculator, you can test different scenarios to see how changes in the property price and the size of your down payment affect the cost of your CMHC mortgage insurance premium and the total amount of your mortgage. Once you see the true costs of your CMHC mortgage insurance premium, you can make an informed decision about purchasing a house.

How to use the Hardbacon CMHC Mortgage Insurance Calculator

It’s super easy to use our calculator. All you have to do is type the numbers in the right spot, and we do the rest. Don’t worry, we’ve labelled everything for you. Before we get started, you need to have some numbers on hand, such as:

1. The price of the house you want to buy
2. The amount of your down payment in dollars or by the percentage of property price

The CMHC Mortgage Insurance Calculator provides a total of four columns that allow you to compare four different scenarios at a glance. In the first column, simply insert the property price of the house you want to buy, then the size of the down payment you currently have or plan to provide.

In the remaining three columns, type in different down payment amounts to compare the financial impact on the amount of mortgage insurance you need, and your total mortgage. When you change an input like the property price or down payment information, the calculator will automatically update and generate new results.

Understanding the results of the CMHC Mortgage Insurance Calculator 

After you have finished adding the numbers to each column of the Hardbacon CMHC Mortgage Insurance Calculator, you will find the results in the last two rows labelled “CMHC Mortgage Premium Required,” and “Total Mortgage Required.” Here, you will see how the property price and size of your down payment impact your mortgage default insurance premium and the size of your mortgage loan.

CMHC Insurance Premium Required: based on the information you provided about the property price and down payment, this number is the total amount of your CMHC mortgage insurance premium required to insure your mortgage. This number does not include any applicable fees charged by CMHC or the financial institution financing your mortgage loan.

Total Mortgage Required: this number is the total amount of your mortgage after your down payment has been applied and the total amount of CMHC mortgage insurance has been added. This number does not include applicable fees, closing costs, or total interest paid over the life of your mortgage.

Use the Hardbacon Mortgage Calculator to determine the true cost of homeownership, including the amount of interest you’ll pay over the life of your mortgage.

Understand more about the CMHC Mortgage Insurance Calculator Inputs

CMHC mortgage insurance can make homeownership more accessible for Canadians. There are some key variables that can impact the amount of your mortgage insurance premium and the size of your mortgage loan. Below is a detailed description for each input of the CMHC Mortgage Insurance Calculator and where you can find that information.

Property Price 

Not to be confused with the list price, the property price is the final price that you and the seller have agreed upon. The price you actually purchase the house for will have an impact on the amount of the CMHC mortgage insurance premium required to insure your mortgage. If a seller has accepted your offer, enter the purchase price into the field labelled “Property Price.” If you are thinking of purchasing a home and have not yet submitted an offer, you can use the list price for now. When you change the property price amount, the calculator will automatically recalculate the dollar amount of your down payment, mortgage insurance premium, and total mortgage.

Down Payment

In Canada, the minimum down payment required to buy a house under $500,000 is 5% of the purchase price. Homes over $500,000 require at least 5% on the first $500,000, and at least 10% on the remainder. Houses that cost more than $1,000,000 do not qualify for CMHC mortgage insurance and require at least a 20% down payment. When using the Mortgage Insurance Calculator, there are two ways you can either enter or calculate your down payment.

1. Enter the property price of the house you want to purchase, then adjust the down payment percentage. The calculator will generate the dollar amount required for your down payment to satisfy the desired percentage of the purchase price.
2. Enter the property price of the house you want to purchase, then enter the dollar amount of the down payment you have or plan to provide. The calculator will generate the percentage of the purchase price your current or desired down payment represents.

Understanding mortgage default insurance in Canada

Buying a house with only a 5% down payment can help turn the dream of homeownership into a reality for those who might not otherwise be able to afford a down payment. But who exactly is CMHC, what do they do, and how does mortgage default insurance work? Below is a brief history of the CMHC, and how mortgage default insurance works in Canada.

Is mortgage default insurance the same as mortgage life insurance?

No. While both have the word “insurance” in their name, mortgage default insurance and mortgage life insurance are two very different things. While mortgage life insurance is not a legal requirement in Canada, mortgage default insurance is legally required for certain borrowers.

Mortgage life insurance is a type of loan insurance. Loan insurance protects the value of your estate from any outstanding debt you may have if you pass away prematurely. If you have mortgage life insurance, your mortgage lender is the beneficiary of your mortgage life insurance policy, not a partner or loved one. In the event you pass away before your mortgage is paid off, your mortgage life insurance provider will pay your lender a lump sum of money in the amount required to pay the outstanding mortgage balance off in full.

Mortgage default insurance only protects the mortgage lender, not you or your estate. If you have mortgage default insurance, the mortgage default insurance provider will compensate your mortgage lender for financial loss if you are unable to maintain your mortgage payments. If you are unable to make your mortgage payments, the loan will go into default and the mortgage lender will repossess your home and sell it. CMHC will then reimburse your lender for any balance owing after your home has been sold.

What does CMHC stand for? 

The Canadian Mortgage and Housing Corporation (CMHC) is a government-owned agency, called a crown corporation, that oversees the housing industry in Canada. After World War Two, The Wartime Housing Corporation was established to help returning veterans secure affordable housing. In 1946, The Canadian Mortgage and Housing Corporation was established to replace the Wartime Housing Corporation. Originally named Central Mortgage and Housing, their focus expanded from war veterans to all Canadians. Its primary purpose was to make safe and secure housing more accessible to low-income families, the elderly, and those with disabilities

In 1979 it was renamed the Canadian Mortgage and Housing Corporation (CMHC). Today, the CMHC is responsible for enforcing the National Housing Act (NHA); an act passed in 1938 by parliament to ensure affordable housing for every Canadian. The National Housing Act helps to facilitate new housing development, update existing housing and seeks to improve overall housing and living conditions in Canada.

The CMHC’s primary goal is to create a stronger and safer society by stabilizing the housing market and making it more accessible to Canadians. When a person has safe and secure housing, they perform better in school, are more likely to stay employed, and can participate more fully in the Canadian economy and society.

What is CMHC mortgage insurance?

CMHC mortgage insurance is more accurately called mortgage default insurance. It works by providing a financial safety net for your mortgage lender to protect them from loss in the event you can no longer make your mortgage payments. It is an insurance policy for your financial institution that pays them the balance of your outstanding mortgage if you default on your mortgage loan.

However, your mortgage lender does not pay the premium for this insurance policy. Instead, they pass the cost on to you. If you require mortgage default insurance, the total amount of the premium can be added to your total mortgage loan at the time of financing, or you can pay for it upfront in a lump sum. Most borrowers choose to have their mortgage default insurance premium added to their mortgage loan.

How does mortgage default insurance work? 

In Canada, the average cost of a house is roughly $500,000 at the time of writing. Normally, you would need to provide a 20% down payment to qualify for a traditional mortgage in order to purchase a home. Based on the average cost of housing, that would make your down payment about $100,000. Saving a down payment that size is out of the realm of possibility for millions of Canadians.

Borrowers who cannot provide a down payment of at least 20% of the purchase price are considered at high risk of default by mortgage lenders. They either do not approve those mortgage applications, or they finance the mortgage with an extremely high mortgage interest rate and more rigid conditions. But why?

When you purchase a house with a down payment of less than 20% percent of the purchase price, your mortgage is called high-ratio. That means your mortgage lender must finance more than 80% of the purchase price, up to 95%. High-ratio mortgages are statistically more likely to default, and the borrowers have much less equity. Most mortgage lenders are unwilling to take on the increased risk. Therefore, many hard-working Canadians are unable to access the real estate market to secure affordable housing. The large 20% down payment to qualify for a conventional mortgage required by a traditional lender is often out of reach.

The CMHC bridges the gap by allowing qualified Canadians to provide a down payment as little as 5% of the purchase price. In Canada, borrowers who are unable to provide the minimum 20% down payment are legally required to have mortgage default insurance. If you meet CMHC qualifications, they will provide your mortgage lender with financial protection against loss in the event you default on your mortgage payments.

By protecting lenders from increased risk, the lender is able to advance mortgages to people they would have otherwise turned down. In turn, more Canadians are able to secure affordable housing. This also helps to ensure fair and affordable mortgage interest rates for those with smaller down payments by mitigating the risk of default.

Is CMHC the only default mortgage insurance provider in Canada?

While CMHC is the most well-known mortgage default insurance provider in Canada, it isn’t the only provider or even the biggest. In addition to CMHC, there are two other privately owned mortgage insurance providers:

Sagen (formerly Genworth Financial) is the largest default insurance provider in Canada. They provide mortgage default insurance for borrowers who cannot provide a 20% down payment, or who do not meet the CMHC qualification requirements.

Canada Guaranty also works with private investors and alternative lenders to offer mortgage default insurance to subprime borrowers and those with difficult or unusual financial profiles. They also work with lenders to offer unconventional lending solutions.

Lenders that are approved by the National Housing Act (NHA) can offer CMHC insured mortgages. That includes the Big 5 federally regulated banks and most credit unions in Canada. Lenders that are not approved by the NHA, like some alternative private lenders, do not offer CMHC insured mortgages.

How much does CMHC mortgage insurance cost? 

The cost of your CMHC mortgage insurance depends on both the size of your down payment and the size of your mortgage loan. All three mortgage default insurance providers use

the same pricing matrix. Your mortgage default insurance is calculated as a percentage of your mortgage loan, sometimes called the rate.

Rates vary from 2.6% to 4.00% depending on the size of your down payment. The smaller your down payment, the higher your rate will be. Conversely, the bigger your down payment, the lower your rate will be. If you want to save money on mortgage default insurance, try to provide the largest down payment you can realistically afford.

However, there is a hidden cost to mortgage default insurance that is not often pointed out to new borrowers or first-time homebuyers. If you choose to include your premium in your mortgage loan, it is subject to mortgage interest charges; you end up paying interest on your mortgage default insurance which makes it more expensive.

Do I need CMHC mortgage insurance? 

If you are not able to provide a 20% down payment, you need mortgage default insurance. In fact, the Government of Canada prohibits regulated lenders from financing high-ratio mortgages unless the borrower qualifies for mortgage default insurance. However, there are some situations when a lender may require a borrower to have mortgage default insurance, even when the borrower has provided a 20% down payment. The requirements for mortgage default insurance on a conventional mortgage differ from lender to lender, but can apply when:

• The home is in a remote location
• The home is in an economically fragile area
• The borrower is part of a special loan program
• The down payment comes from an unconventional source like a loan

How do I qualify for CMHC mortgage insurance? 

Just because you can buy a house for less than 20% down doesn’t mean it’s guaranteed. In order to obtain CMHC mortgage insurance, you need to meet some pretty strict qualification requirements first. Borrowers who want a CMHC mortgage must ensure:

• The property is in Canada
• It is a residential property, and will be their primary residence; not a vacation, or income property, for example
• They have a 600 credit score or higher
• The property price is less than $1,000,000
• If the property price is under $500,000, the down payment is at least 5%
• If the property price is more than $500,000, the down payment is equal to 5% on the first $500,000 and 10% on the remainder
• The amortization period is no more than 25 years
• The down payment comes from a conventional source like savings, the RRSP Home Buyer’s Plan (HBP), a gift from immediate family, etc.
• Their total cost of housing, including utilities, property taxes, homeowner’s insurance, etc., is no more than 32% of total household income, before taxes
• Their total outstanding debt is no more than 40% of total household income, before taxes
• They are able to pay for all applicable closing costs such as lawyers fees, sales tax, land transfer fees, etc.

Unsure if you qualify for a mortgage? Guess what, we have a calculator for that too. You can use the Hardbacon Mortgage Qualifier Calculator to see if you qualify for a mortgage based on your income, debt, and housing costs.

What happens to my CMHC mortgage insurance if I move or change lenders? 

When it comes time to renew your mortgage you may want to change lenders. In that case, you do not have to pay for CMHC mortgage insurance premiums all over again, as long as you are not withdrawing any equity. However, if you increase the size of your mortgage or extend your amortization period, you may need to pay CMHC premiums on the difference.

Your new lender may request proof that your mortgage is already CMHC insured. Simply show them your CMHC Certificate of Insurance. You would have received this when you first got your mortgage. You can find it with your original mortgage paperwork or you can request it from your lender.

If you move because you sold your first home and purchased a new one, there may be CMHC mortgage portability options available to you. Depending on your situation, you may qualify for a discount on your premiums or even avoid them altogether, for a new CMHC mortgage on your next home purchase. The size of your CMHC premium discount depends on when you purchased your first home, and when you purchased your subsequent home. Your lender will be able to discuss the options available to you.

What happens to my mortgage insurance if I make accelerated payments or pay my mortgage off early?

Your mortgage is covered by CMHC insurance until it is paid off, whenever that may be. It doesn’t matter if you paid the premium upfront with a lump sum or added it to your mortgage loan, it’s a sunk cost. That means if you pay your mortgage off in full early, you will not get a refund on your CMHC mortgage insurance premium.

The amount of premium was determined by the size of your down payment and mortgage amount, not the amortization period. Therefore, if you take advantage of any pre-payment privileges your lender offers or pay the mortgage off in full, you will not receive any refunds or rebates on the CMHC premium you paid.

What happens if I have CMHC mortgage insurance and default on my mortgage loan? 

When you default on your CMHC insured mortgage, you are still on the hook financially. Just because your lender is protected against loss doesn’t mean you can just walk away without any worry. After about 3 months of non-payment, your lender will start either foreclosure or power of sale proceedings, depending on which province you live in. Either way, you’re going to lose your house.

Your lender will take possession of the property and sell it. When a house sells for less than the amount owing on the mortgage balance, that is called a shortfall. If there is a shortfall, your lender will submit a claim to CMHC.

CMHC will reimburse your lender for the shortfall. Then, CMHC will get a judgement against you for the amount of the shortfall. A judgement is a court order requiring you to pay any monies owed to CMHC. Therefore, you are still responsible to pay your mortgage even though you had mortgage default insurance; it is protection for the lender, not you.