CMHC Mortgage Loan Insurance
CMHC stands for Canadian Mortgage and Housing Corporation. The CMCG Mortageg Loan Insurance is an insurance that covers a lender’s risk which is linked with financial loss (normally occurring when the person is unable to pay mortgage loan.
The amount of the premium for this insurance can vary between 0.65% and 2.74% depending on what proportion of the home value is invested with the mortgage loan.
With the help of CMHC Mortgage Loan Insurance, one can be the owner of the property by paying a down payment which can be as low as 5% of the purchase price. The actual proportion depends on the property price. The minimum down payment for a solo family and two unit residence is 5% while it is 10% for up to a four unit residence. Only Canadian citizens can apply for CMHC Mortgage Loan Insurance.
The CMHC Mortgage Loan Insurance offers many advantages. It can be applied to various kinds of housing and is available everywhere in Canada. It has also several flexible products and options to help the buyer in going for the best investment.
Before applying for CMHC, a person should check: -
- The qualifying criteria
- Whether the lender approved by CMHC?
- That the total housing cost including Principal amount, Interest accrued, property tax and heating costs (P.I.T.H.) should not be more than thirty two percent of the gross household income.
- That the total debt should be less than forty percent of the gross income. To get the Total Debt Service (TDS) ratio add up the P.I.T.H. and payments on all other debt / gross annual household income and 50% of condominium fees (if applicable).
- That the closing cost (like the lawyer fees, adjustments, land transfer tax if applicable, PST and GST as applicable etc.) into account. This is usually two to four percent of the purchase price.
Remember that the higher the value of the house the higher will be the insurance premiums. This insurance is paid by the lender, who later passes on the charges to the actual buyer.