As a first time home buyer, you may be eligible for a high ratio mortgage. This means you could own your home with as little as a 5% down payment. This type of high ratio mortgage requires Canada Mortgage and Housing Corporation (CMHC) financing or insurance – which means, to a degree, CMHC is guaranteeing your loan with the bank. Net, you do pay a bit more than a traditional mortgage but you can own your home sooner and without a large lump sum deposit (typically 20%) at time of completion. This type of mortgage has successfully helped many first time home buyers enter the market and own their home.
CMHC is increasing the premiums again effective June 1, 2015. This will affect you if you have less than a 10% down payment.

EXAMPLE: Buying a home with 5% down (95% Loan-to-Value)

YOUR NEW HOME COSTS   $262,500
LESS 5% DEPOSIT                $12,500
LOAN PRINCIPAL                  $250,000
CURRENT PREMIUM            $7,875
NEW PREMIUM                     $9,000

ADDITION TO PREMIUM IF YOU BUY AFTER THE DEADLINE: $1,125
* Based on a 5 year term @ 2.79% and a 25 year amortization. Figures are estimates only. Taxes and additional fees are not included.

If you are interested in learning more about CMHC programs, please contact your banker or visit the CMHC website.

FAQ

1. When do I need mortgage loan insurance?
   Typically lenders will require mortgage loan insurance if a borrower (you) has a down payment of less than 20% of the purchase price of the home. By protecting lenders against borrower default, CMHC Mortgage Loan Insurance creates an opportunity for Canadians to realize their dreams of homeownership.
2. Is there a maximum purchase price for CMHC Mortgage Loan Insurance?
   Yes, the maximum purchase price or as-improved property value must be below $1,000,000.
3. Who arranges CMHC Mortgage Loan Insurance?
   Your lender will arrange for the purchase of CMHC Mortgage Loan Insurance. When you negotiate your loan terms make sure to ask that the mortgage be CMHC insured.
4. Does CMHC Mortgage Loan Insurance only apply to traditional single-family residential properties?
   No, CMHC offers mortgage loan insurance products on various property types including condominiums, townhomes, duplexes, owner-occupied properties, manufactured or mobile homes, properties requiring renovations and much more, including rental and nursing homes.
5. I recently purchased a home which closes before June 1, 2015, and my mortgage will be CMHC-insured. Will the premium increase affect me?
   No, CMHC’s new premium rates will be effective for new mortgage loan insurance requests submitted to CMHC on or after June 1, 2015, regardless of the closing date of the home purchase. Just in case, you should make sure that your lender submits the request for CMHC before June 1, 2015.
6. I am planning to buy a home in the coming months and will require a CMHC-insured mortgage. Will the premium increase affect me?
   Your lender must have the property information and address in order to submit the request for mortgage loan insurance. The request must be filed before June 1, 2015.   If you want to avoid the premium increase, we suggest finding your home, sign a Purchase and Sales Agreement and meet with your lender all before May 25, 2015 – this will give you a few days buffer before the final deadline.