Homebuyers in Canada require mortgage default insurance whenever they are placing less than a 20% down payment on their purchase. Typically first time home-buyers take advantage of CMHC mortgage insurance to allow them to put as little as a 5% down payment on their purchase.
First time home-buyers are also commonly confused with what CMHC mortgage insurance is by thinking it is mortgage life insurance, title insurance or payment insurance.
To help buyers understand a little more about CMHC, here are the answers to five of the most commonly asked questions when it comes to CMHC insurance.
Who is CMHC?
Who needs CMHC?
Any home-buyer in Canada who enters into a high ratio mortgage (less than 20% downpayment), needs CMHC or other mortgage insurance in order to get a mortgage. Another common mortgage insurer, not federally owned, is Genworth.
What does CMHC insure?
CMHC is insuring the amount of money the home-buyer borrowed from the bank for the mortgage. CMHC mortgage insurance does not cover fire, health or title and deed. CMHC is in place to protect the financial institution who placed your mortage in case of default or foreclosure.
Who pays the CMHC insurance premiums?
The home buyer pays the CMHC premiums. The payment is calculated according to the amount of the mortgage and the amortization.
Who gets the CMHC insurance payout?
In the event of foreclosure, the lender takes possession of the property and sells it to recover the remaining mortgage amount. Should the property sell for less than what is owed on it, CMHC pays the outstanding balance to the mortgage lender.
What to know more?
For more information on CMHC mortgage insurance contact me.