CMHC Insurance: Bands, Thresholds & Examples
Complete guide to CMHC mortgage insurance requirements, premium rates, and calculations
CMHC (Canada Mortgage and Housing Corporation) insurance is a crucial component of the Canadian mortgage system. If you're putting down less than 20% on your home purchase, you'll need to understand how this insurance works, what it costs, and how it affects your monthly payments.
Quick Summary
CMHC insurance is required when your down payment is less than 20% of the home's value. The premium ranges from 2.8% to 4.0% of your mortgage amount, depending on your loan-to-value ratio.
What is CMHC Insurance?
CMHC insurance protects lenders against default when borrowers make a down payment of less than 20%. This insurance allows Canadians to purchase homes with as little as 5% down, making homeownership more accessible.
While the insurance protects the lender, the borrower pays the premium. This might seem counterintuitive, but it's this system that enables lenders to offer mortgages with smaller down payments.
CMHC Premium Bands and Rates
CMHC premiums are calculated based on your loan-to-value (LTV) ratio. Here are the current premium bands:
| LTV Ratio | Down Payment | Premium Rate | Example Premium* |
|---|---|---|---|
| 80.0% - 95.0% | 5.0% - 20.0% | 4.00% | $16,000 |
| 95.0% - 90.0% | 10.0% - 5.0% | 3.10% | $12,400 |
| 90.0% - 85.0% | 15.0% - 10.0% | 2.80% | $11,200 |
*Example based on $400,000 mortgage amount
How LTV is Calculated
Loan-to-Value (LTV) ratio is the percentage of the home's value that you're borrowing:
LTV Formula:
Example:
Home Price: $500,000
Down Payment: $50,000 (10%)
Mortgage Amount: $450,000
LTV: $450,000 ÷ $500,000 = 90%
At 90% LTV, the CMHC premium would be 3.10% of the mortgage amount.
Payment Options: Upfront vs. Added to Mortgage
You have two options for paying your CMHC premium:
Option 1: Pay Upfront
- Pay the full premium at closing
- No additional interest charges on the premium
- Requires more cash at closing
- Lower monthly payments
Option 2: Add to Mortgage (Most Common)
- Premium is added to your mortgage amount
- You pay interest on the premium over the life of the mortgage
- Less cash required at closing
- Higher monthly payments
Real-World Examples
Example 1: First-Time Buyer
Scenario:
- Home Price: $450,000
- Down Payment: $22,500 (5%)
- Mortgage Amount: $427,500
- LTV: 95%
CMHC Details:
- Premium Rate: 4.00%
- Premium Amount: $17,100
- New Mortgage Amount: $444,600
- Additional Monthly Cost: ~$95
Example 2: Move-Up Buyer
Scenario:
- Home Price: $600,000
- Down Payment: $90,000 (15%)
- Mortgage Amount: $510,000
- LTV: 85%
CMHC Details:
- Premium Rate: 2.80%
- Premium Amount: $14,280
- New Mortgage Amount: $524,280
- Additional Monthly Cost: ~$79
Strategies to Reduce or Avoid CMHC Premiums
1. Save for a 20% Down Payment
The most straightforward way to avoid CMHC premiums entirely is to put down 20% or more. On a $500,000 home, this means saving $100,000 instead of $25,000 (5% minimum).
2. Consider a Blended Mortgage
Some lenders offer "blended" products where you take a conventional mortgage for 80% of the home's value and a higher-rate second mortgage for the remainder, potentially saving on CMHC premiums.
3. Family Gifts
Gifts from immediate family members can help you reach a higher down payment threshold and reduce your CMHC premium rate.
Important Considerations
Key Points to Remember
- CMHC premiums are non-refundable, even if you pay off your mortgage early
- The premium is based on the mortgage amount, not the home price
- Investment properties and second homes are not eligible for CMHC insurance
- Maximum home price for CMHC insurance is $1 million
- Premium rates can change, so confirm current rates with your lender
Frequently Asked Questions
Q: Can I get CMHC insurance removed later?
A: CMHC insurance cannot be removed from your mortgage, even if your home's value increases and your LTV drops below 80%. You would need to refinance your mortgage to eliminate the insurance.
Q: Are there alternatives to CMHC?
A: Yes, Genworth Financial and Canada Guaranty also provide mortgage insurance with similar rates and terms. Your lender will typically choose the insurer.
Q: Do I need CMHC insurance for a mortgage renewal?
A: If your original mortgage had CMHC insurance, it typically stays with the mortgage through renewals. However, you won't need new insurance if you're just renewing with the same lender.
Q: How does CMHC insurance affect my taxes?
A: CMHC premiums are not tax-deductible for your principal residence. However, if you're using the mortgage for investment purposes, you may be able to deduct the premium proportionally.
Calculate Your CMHC Premium
Use our calculator to see how CMHC insurance affects your mortgage payments.
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Last updated: January 15, 2025
Disclaimer: This guide is for informational purposes only. CMHC rates and requirements may change. Always verify current rates with CMHC or your mortgage professional before making financial decisions.