In Canada, the Canada Mortgage and Housing Corporation (CMHC) provides mortgage insurance to lenders who offer mortgages to homebuyers. This insurance can be a great way for homebuyers to get the financing they need to purchase a home, but there are a few things they should know before they sign on the dotted line.

First, it’s important to understand that CMHC insurance is not a loan. It’s a form of insurance that the lender takes out to protect themselves against the risk of a borrower defaulting on their mortgage. The lender will pay a premium to the CMHC, who will then provide the insurance.

Second, CMHC insurance is not free. The premium for the insurance is added to the borrower’s mortgage and is usually in the range of 0.5% to 3.15% of the purchase price of the home. This means that the borrower will pay more in interest over the life of the mortgage.

Third, CMHC insurance is only available for mortgages with loan-to-value ratios of 80% or less. This means that the borrower must have a down payment of at least 20% of the purchase price of the home. If the loan-to-value ratio is higher than 80%, then the borrower must get private mortgage insurance from a lender or insurer.

Fourth, CMHC insurance is only available for mortgages on homes that are owner-occupied. Mortgages on rental properties, vacation homes, and investment properties are not eligible for CMHC insurance.

Finally, CMHC insurance can be a great way for homebuyers to get the financing they need to purchase a home. However, it’s important to understand the terms of the insurance and the cost associated with it before signing on the dotted line. By understanding these terms, homebuyers can make an informed decision and be sure that they are getting the best deal possible.