Here’s something that may assist first-time home buyers who are unfamiliar with some of the terminology and acronyms that are second nature to seasoned real estate participants.
This one has to do with CMHC, and periodically you can expect to find definitions that everybody thinks you know, just in case you don’t. This acronym stands for Central Mortgage and Housing, a crown corporation in the business of helping improve housing and living conditions for Canadians. It administers the National Housing Act.
Where it usually comes onto the buyers’ radar is by insuring their mortgages. If your down payment is less than 20 per cent on a home you’re planning to purchase, CMHC will be insuring your mortgage, for which you will be paying an insurance premium, of course. In the unlikely but not impossible event the buyer is at some point unable to pay the mortgage, CMHC protects both sides. The lender is guaranteed that his investment is safe…the borrower is guaranteed that CMHC will work to find a way to make the mortgage work by researching and helping to implement payment options, and to help homeowners understand affordability.
CMHC’s premium is calculated as a percentage of the loan and is based on a number of factors such as the purpose of the property (owner occupied or rental), the type of loan (i.e. purchase/construction or refinance loan), the ability of a self-employed borrower to supply income verification, and the size of down payment (i.e. the higher the percentage borrowed, the higher percentage the insurance premiums).
So remember, CMHC is an insurer, not a lender.