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WHAT IS THE CHMC?

Canada Mortgage and Housing Corporation (CMHC) is the federal Crown corporation responsible for housing across Canada as well as the largest mortgage insurer in Canada.

CMHC guarantees mortgages held by financial institutions that lend to individuals with a down payment of less than 20% of the purchase price of their home. Its main role is to facilitate access to home ownership for borrowers by enabling them to borrow toward the purchase of a home while making a down payment of less than the 20% that banks would otherwise require.

http://www.cmhc-schl.gc.ca

THE DOWNPAYMENT: INVESTING IN YOUR PROJECT

When you get a mortgage loan, you are obligated under the Bank Act to invest a sum of money from your personal assets. This is called the downpayment. The downpayment can come from liquid assets taken from your savings accounts, deposit certificates, savings bonds, mutual funds or RRSPs. Cash donations, cashback incentives from lenders and personal loans are also eligible under certain conditions. Moreover, if you own the land on which you'd like to build a home, its value can be used as downpayment. Lastly, if you're building your own home with the help of family and friends, your advisor could use part of the value of this labour, called "sweat equity", to reduce the amount needed for your downpayment.

HOW MUCH TO INVEST?

The bigger your downpayment, the less you'll need to borrow. And the less interest you'll pay! Generally, the minimum required downpayment is 20% of the property's cost or market value, whichever is lower. It is, however, possible to borrow even if you don't have the minimum downpayment. If you need a mortgage worth more than 80% of your property's purchase price, you are legally required to have your loan insured by the Canada Mortgage and Housing Corporation (CMHC). In this case, your downpayment could be from 5 to 20% of your property's value.

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* The CMHC special rate is available exclusively for a new CMHC-insured five-year fixed-rate closed mortgage. The annual percentage rate (APR) is the cost of borrowing for a loan expressed as an annual percentage. It includes all interest rates and fees taken into consideration in calculating the cost of borrowing. Insofar as the cost of borrowing consists only of interest, the APR corresponds to the annual interest rate for a CMHC-insured five-year fixed-rate closed mortgage. Should fees become applicable, the APR may vary. Subject to credit approval. Some conditions apply. This limited-duration offer may be discontinued or modified at any time without notice.