CMHC premium

Definition

The amount charged by the mortgage insurer (CMHC, Sagen, or Canada Guaranty) when the down payment is under 20%. It is calculated as a percentage of the loan, based on the loan-to-value ratio, and is normally added to the principal rather than paid in cash. Example: a $380,000 loan at 95% financing, a premium of about 4%, or $15,200. The loan becomes $395,200 and the monthly payment rises by about $80 over 25 years at 4.5%. In Quebec, the 9% provincial sales tax on the premium is paid at closing and cannot be added to the loan. The actual premium rate depends on the program and the file; a self-employed borrower without two years of history or a rental-property buyer can pay more. The premium is not refunded if you sell.