How to Avoid CMHC Fees: Strategies for Canadian Homebuyers
So, you're wondering how to avoid paying CMHC fees? Good news—there are a few options available that might save you from this added expense.
- Ask your mortgage broker to insure through Sagen (formerly Genworth).
- Ask your mortgage broker to insure through Canada Guaranty.
- Save up a 20% down payment.
Did you know you have a choice when it comes to mortgage insurance providers?
Yes, I can already hear you cursing my name—sorry about that. But if you want to put down less than 20% on your mortgage, there’s no way around paying mortgage insurance fees. You might need to save up more money and wait a little longer. Let’s explore why waiting might be in your best interest—or why it might not be. We’ll also discuss why you might prefer one mortgage insurer over another.
Now vs. Later: The Big Decision
Buy a home now: If you buy now, you could capitalize on the increase in your home’s value during the time it would take you to save up a larger down payment. However, remember that you’ll be paying interest on the mortgage insurance premium if you roll it into your mortgage. The risk here is that if your home’s value drops, you’ll still owe those fees along with the full mortgage amount.
Save for a 20% down payment: Saving up to the 20% mark will eliminate the need for mortgage insurance. However, if home prices keep rising, you might find yourself chasing that threshold for longer than expected. What will mortgage rates look like then? What if the rules for down payments change, requiring you to save even more?
How Do Mortgage Insurance Fees Work?
All mortgage insurers calculate their fees as a percentage of the loan, based on the size of your down payment. The larger the mortgage, the more you’ll pay in fees.
- The highest fees (4.50%) are typically for self-employed individuals without traditional income verification who are borrowing up to 95% of the property value. If you’re self-employed and purchasing a home, these fees will apply unless you can verify your income traditionally.
Most buyers putting 5% down will pay 4.00% of the mortgage amount in insurance fees.
Here’s the sliding scale regulated by the federal government and consistent across all mortgage insurance providers:
- 5% down: 4.00%
- 10% down: 3.10%
- 15% down: 2.80%
- 20% down: No mortgage insurance required.
This means you can save a little by reaching the next threshold. You don’t necessarily need to reach 20%—even getting to 10% or 15% can reduce your insurance costs.
Why Bother with the Other Percentages?
Some lenders insure every deal, whether or not you’re required to pay the premiums. In some cases, the lender might absorb the cost, while in others, they might pass it on to you. Here’s a brief overview of the three major mortgage insurers in Canada:
What Is Sagen (formerly Genworth Canada)?
Founded in 1995, Sagen (previously known as Genworth Canada) is one of the largest private mortgage insurers in the country. They have helped over 25,000 families avoid losing their homes through various assistance programs. Sagen also offers special discounts and partnerships with various national home-related service providers.
What Is Canada Guaranty?
Established on April 16, 2010, Canada Guaranty is the only 100% Canadian-owned private mortgage insurance company. Owned by the Ontario Teachers’ Pension Plan and National Mortgage Guaranty Holdings Inc., they manage over $365 billion in insured mortgages. Canada Guaranty offers incentives for borrowers who purchase or renovate their homes to improve energy efficiency.
What Is CMHC?
The Canada Mortgage and Housing Corporation (CMHC) was established after World War II to help returning soldiers buy homes with lower down payments and easier terms. Today, CMHC is a Crown corporation and the largest mortgage insurer in Canada. They have a strong mandate to support affordable housing initiatives and have invested billions in housing for the homeless and social housing renovations. CMHC also offers a range of tools and apps to help Canadians navigate the homebuying process.
Need Help Saving for a Down Payment?
If you’re still reading, I’m impressed! If you need help or advice on saving for your mortgage down payment, I’m here for you. It’s not just about putting money in an account and watching it grow—it’s about maximizing returns, managing fees, budgeting, and cutting flexible expenses where possible.
Email me at michael.richmond@mortgagearchitects.ca and put "Send me the Mortgage Planner Workshop" in the subject line. I’ll get it to you shortly. I work full-time on mortgages and a couple of hours a week on this blog, so visit my website if you want to learn more: www.you-mortgage.com.
If you want something specific covered next week, leave a comment and let me know! Original content isn’t always easy, so your suggestions are welcome.
THANKS FOR YOUR SUPPORT, SHARES, AND LIKES!
What do you think? Please share your thoughts in the comments.
Dependably yours,
Michael Richmond
Independent Mortgage Broker & Team Leader
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