Canada Mortgage and Housing Corporation is a Crown Corporation. It was established
to administer the National Housing Act of Canada and can therefore design programs
to create employment by encouraging construction of new dwellings and improving
the quality, accessibility and affordability of homes everywhere in Canada.
For over 50 years, CMHC has developed new ways of helping Canadians finance
home purchases and has encouraged innovation in housing design and technology.
Mortgages under the National Housing Act can be obtained through CMHC approved
lenders. These lending institutions can provide high ratio mortgage financing
above 80% of the purchase price or appraised value of a property, provided
there is mortgage insurance on the loan.
A credit report shows the past loan, payment records and credit history of
an applicant. A satisfactory credit report is a requirement for obtaining the
mortgage approval from a lender and CMHC.
Gross Debt Service (GDS) and Total Debt Service (TDS): How much mortgage
debt can an applicant afford?
For the GDS calculation, the applicant must not use more than 35% of his/her
gross family income towards paying the principal, interest, taxes and heating
(and 50% of condo fees if applicable.) For the TDS calculation, the CMHC states
that the principal, interest, taxes and heating, plus other debts including payments
on borrowed downpayment, must not exceed 42% of the gross family income.
The applicant must meet CMHC debt service criteria in order to qualify for mortgage
Zero Down Payment
In addition to the traditional 5% minimum downpayment requirement, CMHC's flex
down program allows the 5% downpayment to come from different sources such as
lender cash back incentives, lines of credit/credit cards, arm's length personal
loans or gifts, and 100% sweat equity from either the borrower or another party
who is in an arm's length position for the purchase transaction. Payments on
borrowed funds must be included in the TDS calculation. Applicants must have impeccable credit. They are required to show the ability to cover closing costs of at least 1.5% of the purchase price from the applicants' own resources. These funds can be borrowed as long as any associated payment amortized over a 12 month repayment period is included in the TDS calculation.
CMHC limits the risk to approved lenders by providing mortgage insurance against
principal and interest losses arising from mortgage defaults. As a result, CMHC
approved lenders feel positive
with the availability of mortgage insurance through CMHC. The home purchaser
requiring high ratio financing in excess of 80% of the property's value obtains
the mortgage insurance through a selected lender as part of the mortgage arrangement.
CMHC's mortgage loan insurance helps Canadians to realize their dream of owning
A borrower must pay the mortgage insurance premium
in order for a mortgage loan to be insured through CMHC.
CMHC uses a sliding scale insurance premium based on loan to value ratios:
(% of property value)
(% of loan)
25 year amortization
30 year amortization
80.01% to 85.00%
85.01% to 90.00%
90.01% to 95.00%
CMHC's Flex Down Product
The mortgage insurance premium, a one time fee, can either be paid in full when the loan is disbursed,
or amortized over the life of the loan and included with each mortgage payment.