CMHC Mortgage is a high ratio mortgage when the down payment provided by a home buyer is less than 20% of the purchase price of a home. In Canada CMHC, Genworth Financial and AIG are 3 insurers that provide high ratio mortgage insurance to home buyers who are buying their homes with less than 20% down payment.
Home buyers can buy with as little as 5% down payment if they are qualified for high ratio mortgages financing. If you are a first time home buyer, check out if you are qualified to withdraw your RRSP savings as down payment. In addition, you should find out if you are exempted from paying the British Columbia “property transfer tax”.
The CMHC mortgage insurance premium payable for a high ratio mortgage is dependent the amount you provide as down payment. The CMHC insurance premium may range from 1.00% to 2.75% of your mortgage amount.
Buying with 5% down payment
The less down payment you provide, the more fee you need to pay. This insurance fee can be paid up front or added to your home mortgage. If you plan to buy a home with 5% down payment and get a high ratio mortgage, check with your bank or your local mortgage broker whether you can be approved for CMHC mortgage financing.
The 5% down payment can come from different sources such as lender’s cash back incentives, lines of credit/credit cards, arm’s length personal loans or gifted down payment.
Some lending guidelines for high ratio mortgage financing are:
- The home must be located in Canada and is to be occupied as your principal residence.
- Your payment must not exceed 32% of your gross household income. This includes payment of principal + interest + property taxes + heat + condo fees.
- In addition to the above ‘shelter costs’, your total other debts including credit cards, car loans and personal loans must not exceed 40% of your gross annual income.
- You must be able to cover closing costs equivalent to at least 1.5% of the purchase price.
- You meet the lender’s eligibility requirements regarding income, employment and credit worthiness.
If you like to find out more information on getting a mortgage, kindly contact me (Elsie Tse) at 604-716-3369 or Email Me.