Making home ownership more accessible

Saving for a down payment can be the hardest part of buying a home. Mortgage loan insurance helps consumers buy a home with little or no money down and enjoy the competitive interest rates normally reserved for home buyers who make a larger down payment.

Most financial institutions will require mortgage loan insurance when the homebuyer has less than a 20-per cent down payment.

The insurance premium associated with mortgage loan insurance is calculated as a percentage of the loan and generally passed on to the borrower. It can be paid as a lump sum or included as part of your mortgage payments.

Lenders typically require mortgage loan insurance when homebuyers make a down payment of less than 20 per cent of the purchase price.

Mortgage loan insurance helps protects lenders against mortgage default, and enables consumers to purchase homes with little or no down payment - with interest rates comparable to those with a 20 per cent down payment.

As with any insurance, there are insurance premiums to be paid. The amount of the premium varies and can range between 0.65 per cent and 2.75 per cent depending upon how much of the purchase price/home value is financed with a mortgage loan.

Remember: without mortgage insurance you may avoid the insurance premium but you'll typically pay much higher interest rates and additional administrative fees.

At the end of the day, for the vast majority of borrowers, the cost of CMHC Mortgage Loan Insurance is more than fully offset by the savings achieved.

CMHC offers lenders a wide range of flexible mortgage loan insurance products and options to help them tailor their mortgage offerings to homebuyers' unique situations:

- CMHC Flex 100 allows qualified borrowers to obtain a mortgage of up to 100 per cent of the home's value. Launched in November 2006, CMHC Flex 100 is available to borrowers who have a proven track record of managing their debt and who have the financial capacity to repay the mortgage, but have not yet saved for a down payment.

- CMHC Flex Down enables borrowers to use a wide range of sources for a 5-per-cent down payment, including borrowed funds, gifts and lender cash-back incentives. To be eligible, borrowers must have a proven track record of managing their debt and sufficient income to support mortgage payments.

- Extended amortization periods of up to 40 years allow qualified borrowers more flexibility in financing their mortgage over a longer term to reduce their monthly payments.

Since Canada Mortgage and Housing Corporation (CMHC) introduced Canadians to mortgage loan insurance in 1954, it has facilitated the financing of more than nine million homes - helping generations of Canadians achieve their dream of homeownership.

CMHC continually strives to reduce the cost of mortgage financing for Canadians, having reduced homeowner mortgage loan insurance premiums for first-time homebuyers by up to 30-per-cent since 2003 and eliminated application fees in 2006.

For more information on CMHC mortgage loan insurance, borrowers are encouraged to contact their lenders or visit www.cmhc.ca.

(Source: Vancouver Sun)