Do I have to pay CMHC when refinancing? This is a common question that many homeowners ask when they’re thinking about refinancing their mortgage. For those who don’t know, CMHC (Canada Mortgage and Housing Corporation) is a federal organization that offers mortgage loan insurance to Canadian homeowners. But the question is, do you have to pay for CMHC insurance every time you refinance your home loan? Well, the answer isn’t as straightforward as you might think.
As someone who’s gone through the process of refinancing, I know how confusing it can be to navigate the world of mortgage loans and insurance. There are so many details to keep track of, and it’s easy to get overwhelmed. And when it comes to CMHC, the rules and regulations can be particularly opaque. But fortunately, there are some things you can do to make the process easier and less stressful. So if you’re thinking about refinancing your home loan, keep reading to learn more about CMHC insurance and whether or not you’ll have to pay for it.
One thing to keep in mind is that CMHC insurance isn’t always required when you refinance your mortgage. In fact, there are some situations where you might be exempt from paying CMHC premiums altogether. For example, if the value of your home has increased significantly since the time of your original mortgage, you might not need to pay for CMHC insurance when you refinance. Similarly, if you have a large down payment and a good credit score, you might be able to avoid CMHC insurance fees. Of course, every case is different, and it’s always a good idea to talk to a professional to get personalized advice.
Definition of CMHC
CMHC, or Canada Mortgage and Housing Corporation, is a federal Crown corporation that offers mortgage loan insurance and provides housing policy research. It was established in 1946 in response to the post-World War II housing shortage, and its main objective is to make housing more affordable and accessible for Canadians.
When an individual or family wants to buy a home in Canada but cannot afford a down payment of 20% or more, they are required by law to get mortgage loan insurance. This type of insurance protects the lender in case the borrower defaults on their loan. CMHC is the largest provider of mortgage loan insurance in Canada.
- CMHC mortgage loan insurance premiums can vary depending on the down payment amount and the total mortgage amount. Generally, the smaller the down payment, the higher the insurance premium will be.
- CMHC provides a range of online resources and tools to help homebuyers, including a mortgage affordability calculator and a step-by-step guide to buying a home.
- CMHC also conducts research and analysis on Canada’s housing market and provides regular reports on trends and developments. This information is useful for policymakers, real estate professionals, and homebuyers alike.
Overall, CMHC plays a crucial role in Canada’s housing market by ensuring that more Canadians have access to affordable and secure housing. While some Canadians may view the requirement for mortgage loan insurance as an extra expense, it is an important safeguard for both lenders and borrowers and can help make homeownership possible for those who might not otherwise be able to afford it.
For homeowners considering refinancing their mortgage, it is important to note that CMHC mortgage loan insurance is typically required for refinanced mortgages with a loan-to-value ratio greater than 80%. However, CMHC mortgage loan insurance premiums may be lower for refinanced mortgages than for new mortgages, depending on the specific circumstances.
| Loan-to-Value Ratio | Insurance Premium |
|---|---|
| Up to and including 65% | 0.60% |
| Up to and including 75% | 1.70% |
| Up to and including 80% | 2.40% |
| Up to and including 85% | 2.80% |
| Up to and including 90% | 3.10% |
| Up to and including 95% | 4.00% |
| 90.01% to 95% – Non-Traditional Down Payment | 4.50% |
Homeowners should consult with their lender or mortgage broker to determine the specific CMHC mortgage loan insurance premiums associated with their refinanced mortgage.
Refinancing a Home
Refinancing a home is a process where you replace your existing mortgage with a new one, with the goal of getting a better interest rate, term, or repayment option. It can be an excellent way to save money in the long run and reduce your monthly payment. However, refinancing comes at a cost, and one of the expenses you may need to prepare for is the CMHC (Canada Mortgage and Housing Corporation) fee.
- What is CMHC?
- Do you have to pay CMHC again when refinancing?
- How much is the CMHC fee for refinancing?
CMHC is a federal agency responsible for providing mortgage insurance to lenders across Canada, making it easier for Canadians to buy a home. Mortgage insurance is mandatory for buyers who are making a down payment of less than 20% of the purchase price of a home. The insurance protects the lender if the borrower defaults on their loan. CMHC charges a fee for this insurance that is typically added to the mortgage amount and paid off over the life of the mortgage.
Technically, when you refinance, you are taking out a new mortgage, which means you will need to pay the CMHC fee again if your down payment is less than 20%. However, if your new mortgage is with the same lender and your original mortgage had CMHC insurance, you may be able to transfer the insurance to the new mortgage. This can save you money on the CMHC fee, as you will only need to pay the difference in insurance premiums between your old and new mortgage amounts.
The CMHC fee for refinancing is the same as it is for purchasing a home, and it is based on the size of your down payment. If you are putting down less than 10%, your fee will be 4% of the mortgage amount. If you are putting down between 10-15%, your fee will be 3.1%, and if you are putting down between 15-20%, your fee will be 2.8%.
It’s important to keep in mind that in addition to the CMHC fee, there may be other costs associated with refinancing, such as appraisal fees, legal fees, and penalties for breaking your existing mortgage term early. It’s essential to weigh the costs and benefits of refinancing carefully before making a decision.
In conclusion, if you are refinancing your home and your down payment is less than 20%, you will likely need to pay the CMHC fee again. However, in some cases, you may be able to transfer your existing CMHC insurance to the new mortgage. Regardless, it’s crucial to consider all the costs associated with refinancing and make an informed decision based on your financial situation and goals.
| Down payment size | CMHC fee |
|---|---|
| Less than 10% | 4% of mortgage amount |
| 10-15% | 3.1% of mortgage amount |
| 15-20% | 2.8% of mortgage amount |
The Role of CMHC in Refinancing
Canadian homeowners who are refinancing their mortgage will likely come across the Canada Mortgage and Housing Corporation (CMHC) fees. CMHC is a government agency that provides insurance to lenders in the event of borrower default. Here’s what you need to know about CMHC’s role in refinancing:
Do I have to pay CMHC when refinancing?
- If you are refinancing your mortgage, and the new mortgage amount is less than 80% of the value of your property, you won’t have to pay CMHC fees.
- If your new mortgage amount is more than 80% of your home’s value, you may have to pay CMHC fees. These fees are calculated as a percentage of your mortgage amount and can range from 0.6% to 4.5%.
- It’s important to note that CMHC fees are typically added to the mortgage amount, which means you’ll end up paying interest on these fees over the life of your mortgage.
How CMHC insurance affects refinancing
When refinancing, many lenders require you to have CMHC insurance if your new mortgage amount is more than 80% of your home’s value. This insurance gives the lender protection in case you default on your mortgage payments. However, if you have built up enough equity in your home, you may be able to waive CMHC insurance.
It’s important to shop around and compare mortgage rates from different lenders. Some lenders offer lower mortgage rates if you have a larger down payment or a higher credit score, which could help you avoid paying CMHC insurance when refinancing.
CMHC insurance premiums
If you do have to pay CMHC fees, the amount will depend on the size of your mortgage and the down payment you are putting towards the new mortgage. Here’s a breakdown of the CMHC insurance premiums:
| Loan to Value Ratio | Standard Premium (Current) |
|---|---|
| Up to and including 65% | 0.6% |
| Up to and including 75% | 1.70% |
| Up to and including 80% | 2.4% |
| Up to and including 85% | 2.8% |
| Up to and including 90% | 3.1% |
| Up to and including 95% | 4.5% |
It’s important to factor in these insurance premiums when calculating the total cost of refinancing your mortgage.
In summary, understanding the role of CMHC in refinancing is key to making informed decisions about your mortgage. While CMHC fees may be an extra cost, they can provide benefits such as access to lower mortgage rates and protection for lenders in case of borrower default. It’s important to consult with a mortgage professional to determine the best course of action when refinancing your mortgage.
Mortgage Insurance
When refinancing your mortgage in Canada, one of the expenses that you may encounter is the CMHC or mortgage insurance fee. Mortgage insurance is required on most Canadian mortgages with a loan-to-value ratio of more than 80 percent, which means if you have less than 20 percent down payment, you will need to pay this insurance.
- What is mortgage insurance?
- How much is CMHC mortgage insurance for refinancing?
- Is mortgage insurance tax deductible?
- How to avoid paying for mortgage insurance?
Mortgage insurance is an added protection for lenders in case a borrower defaults on their mortgage payments. If you have a high ratio mortgage (a mortgage where the loan-to-value ratio is more than 80 percent), lenders require mortgage insurance to protect themselves against the risks of default. The insurer (CMHC, Genworth Financial, or Canada Guaranty) pays out the lender for any losses incurred due to the default of the mortgage loan.
The cost for CMHC mortgage insurance is calculated as a percentage of the loan amount. The rate you pay is based on the loan-to-value ratio of your mortgage. The rates can vary, but here’s a sample CMHC premium table for refinancing.
| Loan-to-Value Ratio | Standard Premium Rate |
|---|---|
| Up to and including 65% | 0.60% |
| More than 65% up to and including 75% | 1.70% |
| More than 75% up to and including 80% | 2.40% |
| More than 80% up to and including 85% | 2.80% |
| More than 85% up to and including 90% | 3.10% |
| More than 90% up to and including 95% | 4.00% |
Unfortunately, mortgage insurance is not tax-deductible in Canada. However, if you bundled your mortgage insurance with your mortgage loan to avoid paying any upfront premiums, you can still claim the mortgage interest on your taxes as usual.
If you want to avoid paying for mortgage insurance, you’ll need to have a down payment of at least 20% of the purchase price of the home. Otherwise, you can ask someone to be a co-signer or guarantor. They need to have equity in their home to use as collateral to secure this loan. Alternatively, you can also save up to increase your down payment, buy a cheaper home, or wait until you can build up enough equity in your current home to refinance without mortgage insurance.
Types of Mortgage Insurance
When it comes to mortgage insurance, there are a few different types to consider. Each type serves a different purpose and has its own set of advantages and disadvantages.
- CMHC Insurance: The Canada Mortgage and Housing Corporation (CMHC) offers mortgage insurance to Canadian homeowners. If you are putting less than 20% down on your home purchase, you will be required to pay for this insurance to protect your lender against default. However, if you are refinancing your mortgage, you may not be required to pay for CMHC insurance, depending on your equity in the property.
- Genworth Canada Insurance: Another option for mortgage insurance is Genworth Canada, which operates similarly to CMHC. Genworth Canada insurance is often used by those who do not qualify for CMHC insurance or who prefer their premiums or application process.
- Life and Disability Insurance: Many lenders offer life and disability insurance on top of your mortgage to protect against unforeseen circumstances. This insurance can help cover your mortgage payments in the event that you become disabled or pass away. However, it is important to shop around for life and disability insurance outside of your mortgage lender to get the best rates and coverage.
- Private Mortgage Insurance: Private mortgage insurance (PMI) is another option for those who need to purchase mortgage insurance. PMI is typically required for those who have less than 20% down payment, similar to CMHC and Genworth Canada insurance. However, PMI is offered through private mortgage insurance companies rather than the government. The cost of PMI can vary depending on the amount of your down payment and the mortgage company you are using.
- Homeowners Mortgage Insurance: Finally, homeowners mortgage insurance is another type of insurance to consider. This insurance is optional and is designed to protect you in the event that your home is damaged or destroyed. If you are refinancing your mortgage, you may want to consider this insurance to ensure you are protected in the event of a natural disaster or other unforeseen circumstances.
Do I Have to Pay CMHC When Refinancing?
As mentioned above, if you are refinancing your mortgage, you may not be required to pay for CMHC insurance, depending on your equity in the property. If you have 20% or more equity in the property, you likely will not be required to pay for CMHC insurance.
| Down Payment | Amount of CMHC Insurance Required |
|---|---|
| Less than 5% | 4% of the mortgage amount |
| 5% to 9.99% | 3.10% of the mortgage amount |
| 10% to 14.99% | 2.80% of the mortgage amount |
| 15% to 19.99% | 2.40% of the mortgage amount |
Keep in mind that if you are refinancing to take out additional funds from your home equity, you may need to pay CMHC insurance on the additional funds if your equity is less than 20%. It is important to speak with your lender or a mortgage professional to determine if you will be required to pay for CMHC insurance when refinancing.
In conclusion, there are a few different types of mortgage insurance to consider when purchasing or refinancing a home. It is important to understand the purpose of each type of insurance and to shop around for the best rates and coverage. If you are refinancing, you may not be required to pay for CMHC insurance if you have 20% or more equity in the property, but there may be other insurance options to consider.
CMHC Fees for Refinancing
Refinancing your home can be an effective way to reduce your mortgage payments, consolidate debt, or access equity in your property. However, it’s important to understand the fees and costs involved in the process. One of these costs is the Canada Mortgage and Housing Corporation (CMHC) fees.
If you’re refinancing with a loan-to-value (LTV) ratio of more than 80%, which means you have less than a 20% down payment, you’ll be required to pay CMHC fees. These fees are typically calculated as a percentage of the total loan amount and can range from 0.5% to 2.95%.
- The CMHC fees for refinancing depend on the loan-to-value (LTV) ratio of your home.
- You’ll be required to pay CMHC fees if your LTV ratio is more than 80%.
- The fees range from 0.5% to 2.95% and are calculated as a percentage of the total loan amount.
The CMHC fees are intended to provide insurance for the lender against default or non-payment of the mortgage. The higher the LTV ratio, the greater the risk for the lender, thus the higher the CMHC fees.
It’s important to note that CMHC fees can be added to your mortgage, so you don’t have to pay them upfront. However, this means you’ll be paying interest on the fees for the life of your mortgage, which can increase the overall cost of borrowing.
| LTV Ratio | CMHC Insurance Premium |
|---|---|
| Up to and including 65% | 0.60% |
| Up to and including 75% | 1.70% |
| Up to and including 80% | 2.40% |
| Up to and including 85% | 2.80% |
| Up to and including 90% | 3.10% |
| Up to and including 95% | 4.00% |
| Above 95% | 4.50% |
If you’re considering refinancing your home, it’s important to weigh the costs and benefits carefully. While CMHC fees can increase the cost of borrowing, they also provide lenders with insurance against default, which can make it easier to obtain financing. Consider consulting with a mortgage expert to determine if refinancing is the right choice for you and to help navigate the fees and costs involved.
Alternatives to CMHC Insurance
While CMHC insurance can help make homeownership more accessible, it does come at an additional cost. Fortunately, there are alternatives to consider when refinancing.
- Increase your down payment: The easiest way to avoid paying CMHC insurance is to increase your down payment. By putting down at least 20% of the purchase price, you can avoid CMHC insurance altogether.
- Mortgage default insurance from private providers: Private mortgage insurance providers offer similar coverage to CMHC insurance, but with different terms and premiums. It’s worth consulting with a mortgage broker to explore your options and compare rates.
- Borrow from family or friends: If you have a close friend or family member who is willing to lend you money, you may be able to avoid CMHC insurance altogether. Just be sure to have a solid repayment plan in place to avoid any potential issues down the road.
It’s important to remember that while CMHC insurance comes with additional costs, it can be a valuable tool for homebuyers who don’t have a large down payment. However, exploring alternatives can help save you money in the long run.
Cost of CMHC Insurance vs. Private Mortgage Insurance
There are several providers of private mortgage insurance in Canada, but they all offer similar coverage with different terms and premiums. To give you an idea of how they compare to CMHC insurance, take a look at the table below:
| CMHC Insurance | Genworth | Canada Guaranty | |
|---|---|---|---|
| Standard Premium Rate* | 4.00% | 4.00% | 4.00% |
| Premium Refund Available* | Up to 25% | N/A | N/A |
| Coverage Amount | Up to 95% LTV | Up to 95% LTV | Up to 95% LTV |
| Minimum Credit Score Required | Depends on the lender | Depends on the lender | Depends on the lender |
*As of August 2021
As you can see, CMHC insurance and private mortgage insurance premiums are typically the same. However, CMHC offers a premium refund if you pay off your mortgage early, which makes it a more cost-effective choice in certain situations.
Do I Have to Pay CMHC When Refinancing?
1) What is CMHC?
CMHC stands for the Canada Mortgage and Housing Corporation, which is a government agency that insures Canadian mortgages to give lenders confidence to lend to those who may have less than 20% down payment.
2) When do I pay CMHC?
If you have less than a 20% down payment when purchasing a home, you must pay CMHC insurance premiums upfront. But if you have already paid the insurance premiums and are refinancing, you do not need to pay them again.
3) What if I am switching lenders when refinancing?
If you are switching lenders and your mortgage is still insured with CMHC, you do not need to pay them again. However, if you are changing to an uninsured loan, you may need to pay CMHC fees again if your loan-to-value ratio increases above 80%.
4) Can I avoid paying CMHC fees?
If you have a large enough down payment (over 20%), you can avoid paying CMHC fees altogether.
5) What if I previously paid CMHC fees, but my home value has increased?
If you previously paid CMHC fees but your home value has increased, you may be eligible to save money on the insurance premiums as it is based on your current loan-to-value ratio.
6) How can I calculate CMHC fees for my refinanced mortgage?
You can use CMHC’s online calculator to estimate your insurance premiums for refinancing. By inputting your refinanced mortgage amount and equity, you will be able to determine if there are any further fees.
Closing Thoughts
Thanks for reading about CMHC fees and refinancing. Keep in mind that if you already paid CMHC fees upfront, you do not need to pay them again when refinancing. If you have any questions or need further advice in regards to your refinanced mortgage, consult a financial advisor or mortgage broker. Remember to visit us again for more informative articles!