# Mortgage Insurance and CMHC



## sagsal (Apr 7, 2009)

Any thoughts on whether CMHC will lower the amount requirement for a downpayment before mortgage insurance is required?

I believe right now it is 20% - why not go to 15% as housing prices have dropped....

Look forward to some thoughts


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## OnlineHarvest (Apr 6, 2009)

sagsal said:


> Any thoughts on whether CMHC will lower the amount requirement for a downpayment before mortgage insurance is required?
> 
> I believe right now it is 20% - why not go to 15% as housing prices have dropped....
> 
> Look forward to some thoughts


Well, I don't see why they will. The Gov't lowered it from 25% to 20% not because house prices were falling. 

And since this is based on percentage, it doesn't really matter if prices are falling. If you buy a house for $500,000, you need a $100,000 down payment to avoid the insurance. Similarly, if you plan to buy the same house that is now in the market for $400,000, you now only require $80,000. Since this is based on a percent (20%), what you need goes down if prices are going down.


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## Ben (Apr 3, 2009)

I do remember when the government dropped the no-charge level from 25% to 20% (just after I bought my house, wouldn't you know it). According to the chart on the CMHC website, you now require 35% downpayment to avoid CMHC fees. I don't recall seeing this change in the news, and was surprised when I first saw this a month ago. 

Does anyone have any insight into this apparent change? I did a search, and did not come up with any commentary, nor do I recall seeing this in the news. Is there something I am not seeing?

Loan-to-Value Standard Premium
Up to and including 65%	0.50%
Up to and including 75%	0.65%
Up to and including 80%	1.00%
Up to and including 85%	1.75%
Up to and including 90%	2.00%
Up to and including 95%	2.75%
Extended Amortization Surcharges
Greater than 25 years, up to and including 30 years: 0.20%
Greater than 30 years, up to and including 35 years: 0.40%


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## mfd (Apr 3, 2009)

Just reading over the site I don't think it that has changed. I think what changed was that banks HAD to get insurance if you had less than 25% down payment...this then changed to 20%. 

But from the look of it the bank always had the option to get your loan insured even if you had 25%+ down payment. So lets say someone is a high risk borrower but they happen to have 35% down payment. The bank decides it wants to insure the loan and would have to pay a 0.50% premium. 

This is what I'm figuring from the website.


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## FrugalTrader (Oct 13, 2008)

Ben said:


> I do remember when the government dropped the no-charge level from 25% to 20% (just after I bought my house, wouldn't you know it). According to the chart on the CMHC website, you now require 35% downpayment to avoid CMHC fees. I don't recall seeing this change in the news, and was surprised when I first saw this a month ago.
> 
> Does anyone have any insight into this apparent change? I did a search, and did not come up with any commentary, nor do I recall seeing this in the news. Is there something I am not seeing?
> 
> ...


Generally speaking, banks will not charge CMHC if you have a 20% down payment even though the CMHC site says otherwise.


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## Ben (Apr 3, 2009)

Thanks MFD & FT, that clears it up for me.


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## Preet (Apr 3, 2009)

Just to add to what's already been said - the schedule of premiums simply indicate the cost. The requirement to have the insurance is a separate matter and is only required at the 20% and under down payment level.

With respect to holding your own mortgage inside your RRSP: then you are required to purchase mortgage default insurance (from CMHC or GE Capital Insurance Canada). The lowest you can expect to pay is the premium of 0.50% of the total mortgage amount (for loan-to-value ratios up to 65%). While it is an extra cost, note that this is actually a good thing as if you default on your mortgage, the insurance will serve to protect your retirement savings!


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## Shayne (Apr 3, 2009)

Some lenders are "insured only" lenders and all of their mortgages are insured. Some pick up the cost for LTV over under 80% and some don't.


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