Canada Mortgage and Housing Corporation is a Crown Corporation. It was established to administer the National Housing Act of Canada and can therefore design programs to create employment by encouraging construction of new dwellings and improving the quality, accessibility and affordability of homes everywhere in Canada. For over 50 years, CMHC has developed new ways of helping Canadians finance home purchases and has encouraged innovation in housing design and technology. Mortgages under the National Housing Act can be obtained through CMHC approved lenders. These lending institutions can provide high ratio mortgage financing above 80% of the purchase price or appraised value of a property, provided there is mortgage insurance on the loan.
Credit Worthiness
A credit report shows the past loan, payment records and credit history of an applicant. A satisfactory credit report is a requirement for obtaining the mortgage approval from a lender and CMHC.
Gross Debt Service (GDS) and Total Debt Service (TDS): How much mortgage debt can an applicant afford?
For the GDS calculation, the applicant must not use more than 35% of his/her gross family income towards paying the principal, interest, taxes and heating (and 50% of condo fees if applicable.) For the TDS calculation, the CMHC states that the principal, interest, taxes and heating, plus other debts including payments on borrowed downpayment, must not exceed 42% of the gross family income. The applicant must meet CMHC debt service criteria in order to qualify for mortgage insurance.
Flex Down Payment
In addition to the traditional 5% minimum downpayment requirement, CMHC's flex down program allows the 5% downpayment to come from different sources such as lender cash back incentives, lines of credit/credit cards, arm's length personal loans or gifts, and 100% sweat equity from either the borrower or another party who is in an arm's length position for the purchase transaction. Payments on borrowed funds must be included in the TDS calculation. Applicants must have impeccable credit. They are required to show the ability to cover closing costs of at least 1.5% of the purchase price from the applicants' own resources. These funds can be borrowed as long as any associated payment amortized over a 12 month repayment period is included in the TDS calculation.
Mortgage Insurance
CMHC limits the risk to approved lenders by providing mortgage insurance against principal and interest losses arising from mortgage defaults. As a result, CMHC approved lenders feel positive with the availability of mortgage insurance through CMHC. The home purchaser requiring high ratio financing in excess of 80% of the property's value obtains the mortgage insurance through a selected lender as part of the mortgage arrangement. CMHC's mortgage loan insurance helps Canadians to realize their dream of owning a home.
CMHC Fees
A borrower must pay the mortgage insurance premium in order for a mortgage loan to be insured through CMHC.
CMHC uses a sliding scale insurance premium based on loan to value ratios:
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Loan Size (% of property value) |
Premium (% of loan) |
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25 year amortization |
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80.01% to 85.00% CMHC's Flex Down Product
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1.75% 2.90% |
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The mortgage insurance premium, a one time fee, can either be paid in full when the loan is disbursed, or amortized over the life of the loan and included with each mortgage payment.
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Canadian Home Mortgage Company Ltd.
Northwest Office:
107 Hawkside Close N.W. Calgary, Alberta T3G 3K8
Phone: (403) 230-0320 Fax: (403) 230-0339
E-mail: bestrate@mortgagecalgary.com
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