The Canada Mortgage and Housing Corporation (CMHC) is a federal government agency in Canada that provides mortgage loan insurance to help Canadian homebuyers, particularly first-time homebuyers, obtain affordable financing for their homes. It was created in 1946 to facilitate the financing, construction, and maintenance of affordable housing in Canada.
As a first-time homebuyer, you may be required by your mortgage lender to purchase mortgage loan insurance from the CMHC or another mortgage insurer if your down payment is less than 20% of the purchase price of the home. This is known as a high-ratio mortgage, and the mortgage loan insurance protects the lender in case you default on your mortgage payments. It allows you to qualify for a mortgage with a smaller down payment, which can be beneficial for those who may not have saved enough for a larger down payment.
CMHC mortgage loan insurance premiums are typically added to your mortgage payments and can be paid over the term of your mortgage or upfront at the time of closing. The cost of the mortgage loan insurance premium depends on the size of your down payment and the purchase price of the home.
It’s important to note that CMHC mortgage loan insurance is not the same as mortgage life insurance, which is an optional insurance that protects you and your family in case of death, illness, or disability, and is not provided by CMHC.
In summary, CMHC is a government agency that provides mortgage loan insurance to help first-time homebuyers and other homebuyers with smaller down payments obtain financing for their homes, while protecting the lender in case of default.