A common question that is often asked, “What is CMHC insurance and why do I have to pay for it?
CMHC insurance is charged when a buyer purchases a home with less than 20% down payment. The premium charged is based on the loan to value of the mortgage to purchase price. This fee is commonly added to the mortgage and amortized typically over 25 years. The reason for the insurance is based on the fact the lender is putting up most of the funds for you to purchase the home and the purchaser is putting up only a small portion, therefore some assurance is required on the lenders site thus CMHC insurance is charged. Effective May 1, 2014 the insurer’s have chosen to increase these premiums thus increasing costs to purchasers. By trying to jump in before May 1st’s increase can save you thousands of dollars over the life of the mortgage. Consult with your mortgage professional today!