Increased CMHC Rates: Not as Scary as they Sound

May 12, 2014

Canada Mortgage and Housing Corporation (CMHC)is the largest provider of mortgage default insurance (commonly known as CMHC insurance) in Canada. You are required to get it if you can't put down at least 20% of the purchase price of your home.

Recently, the Crown Corporation has been trying to limit its exposure to the housing market by getting rid of some of its programs and increasing its mortgage default insurance premium rates. The new rates, effective as of May 1 of this year, look a little scary at firstbut we've run dozens of scenarios that show they aren't as bad as they sound.

Here's a quick look at how CMHC insurance works, followed by some comparisons of rates before and after.

How CMHC Insurance Works

Basically, CMHC insurance exists to protect your lender if you can't make your mortgage payments and have to default. The premium is a percentage of the amount you need to borrow to buy your home, and that percentage is based on the size of your down payment.

Here are the old and new CMHC insurance premium rates:


Difference in CMHC mortgage default insurance premiums



Note that these new CMHC rates do not affect current home owners; they are only applied to purchases made after May 1, 2014.

To calculate your premium, take the purchase price of your home, subtract your down payment, and then multiply what's left over by the premium rate for the percentage of the purchase price you put down.

Using the old premium rates, let's look at an example:

Purchase Price Down Payment = Mortgage$400,000 $40,000* = $360,000

Because you put 10% down, your CMHC premium calculation would have been:

Mortgage × CMHC Rate = CMHC Premium$360,000 × 2.00% = $7,200

That premium is then added to your mortgage and paid off over the life of your loan:

Mortgage + CMHC Premium = Total Mortgage Amount$360,000 + $7,200 = $367,200

Under the new rates, your premium will be:

$360,000 × 2.40% = $8,640

This is $1,440 more ($8,640 $7,200) than beforebut remember, this is added to your mortgage and paid off over a maximum of 25 years, which adds only a few extra dollars to each of your monthly mortgage payments. So that new 2.40% doesn't look quite as scary as it sounds, right?


Let's look at examples of how much more the CMHC premiums will cost in dollars. We've used the benchmark price as of April 2014 and come up with four different down payment scenarios for both old and new premiums.

New Westminster Condo $277,600

CMHC insurance premiums and New Westminster condo


New Westminster Detached House $674,000

CMHC premiums: 4 scenarios for different down payments


Surrey Central Condo $199,300

4 CMHC mortgage insurance premium scenarios for a Surrey Central condo


Surrey Central Detached House $574,200

Effect of CMHC premium increase on Surrey house purchase


As you can see in all four examples, the cost of your CMHC insurance premium decreases as your down payment increasesand the difference between the new and old rates is barely noticeable, if you can afford to put down 15% or more.

The unfortunate news here is that these new premiums are our new reality. So if you currently have less than 20% saved, you will be subject to an increased CMHC insurance premium when you take out your mortgage.


Purchase Price Down Payment = Mortgage$400,000 $40,000* = $360,000

Mortgage × CMHC Rate = CMHC Premium$360,000 × 2.00% = $7,200

Mortgage + CMHC Premium = Total Mortgage Amount$360,000 + $7,200 = $367,200

$360,000 × 2.40% = $8,640

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