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Our portability feature saves money for repeat users of mortgage loan insurance by reducing or eliminating the premium payable on the new insured loan for the purchase of a subsequent home.
You can explore two cost effective options with your clients: straight portability, where no additional premium is required or portability-with-increase, where additional premium is required however, premium credits may be available.
Download our one page CMHC Portability program fact sheet (PDF).
* Current LTV on existing property: (outstanding balance ÷ original purchase price)
For straight portability, the following three criteria must be met:
A property was purchased 3 years ago for $200,000 at 90% LTV. The current outstanding balance is $172,000.
What is the premium to be charged?
Facts:
Since there is no new money, no increase in LTV or increase in amortization, there is no premium to be charged. This qualifies as a straight port.
For portability with increase to loan amount, the following criteria must be met:
A property was purchased 5 years ago for $200,000 at 90% LTV with a 25 year amortization.
What is the premium to be charged?
Facts:
This means $108,000 (new money) X 6.25% (premium for LTV of 90%) = $6,750
or
$270,000 (entire loan amount) X 3.10% = $8,370
The first option is less expensive
** Blended amortization: [(outstanding balance x Remaining Amortization) + (New funds x up to 25 years)]/Total Loan Amount
For portability with increase to loan-to-value, the following four criteria must be met:
A property was purchased 3 years ago for $300,000 at 85% LTV.
Facts:
Given the increase in LTV, the risk has changed and there will be a premium charged.
What is the premium to be charged?
Step 1. Calculate the difference in LTV: 90% - 80% = 10% increase in LTV
Step 2. Increase in LTV multiplied by the purchase price of the property: 10% X $240,000 = $24,000
Step 3. Take the above value and multiply it by the new LTV premium top-up factor: $24,000 X 6.25% = $1,500.00 is the premium due.
The Portability feature may allow for a Premium Credit to reduce the premium payable on a new loan insurance application. The Premium Credit is based on the elapsed time (up to a maximum of 24 months) from the original closing date of the existing CMHC-insured loan to the application received date for the new CMHC-insured loan request.
Full amortization of 25 years is available.
A property was purchased 8 months ago for $200,000 at 90% LTV. The current outstanding balance is $182,000.
What is the premium to be charged?
Facts:
Step 1. Calculate full premium for new loan: $210,000 x 4% = $8,400
Step 2. Premium paid 8 months ago was $5,580
Step 3. Premium was paid within 1 year (and longer than 6 months ago); therefore 50% of $5,580 ($2,790) will be credited toward the new premium: $8,400 - $2,790 = $5,610 is the premium due
Individuals who are Canadian citizens, permanent residents of Canada, or non-permanent residents who are legally authorized to work in Canada.
For homeowner loans (owner-occupied properties), the loan-to-value ratio for 1 – 2 units is up to 95% LTV. For 3 – 4 units, the ratio is up to 90% LTV.
For small rental loans (non-owner occupied), the loan-to-value ratio for 2 – 4 units is up to 80% LTV.
For homeowner loans, the minimum equity requirement for 1 – 2 units is 5% of the first $500,000 of lending value and 10% of the remainder of the lending value. For 3 – 4 units, the minimum equity requirement is 10%.
For small rental loans, the minimum equity requirement is 20%.
For both homeowner and small rental loans, the maximum purchase price / lending value or as-improved property value must be below $1,000,000.
For homeowner loans, CMHC-insured financing is available for one property per borrower/co-borrower at any given time.
The maximum amortization period is 25 years.
The property must be located in Canada and must be suitable and available for full-time, year-round occupancy. The property must also have year-round access (via a vehicular bridge or ferry if it is on an island).
A traditional down payment comes from sources such as savings, the sale of a property, or a non-repayable financial gift from a relative.
A non-traditional down payment must be arm’s length and not tied to the purchase and sale of the property, either directly or indirectly, such as unsecured personal loans or unsecured lines of credit. Non-traditional down payments are available for 1 – 2 units, with 90.01% to 95% LTV, with a recommended minimum credit score of 650.
Whether the property is owner occupied or non-owner occupied, subject to an MLI application or not, we offer different approaches to rental income for qualification purposes.
Find out more about the approach(es) that can be used to calculate rental income and the inputs to consider when calculating the debt service ratios.
At least one borrower (or guarantor) must have a minimum credit score of 600. In certain circumstances, a higher recommended minimum credit score may be required. CMHC may consider alternative methods of establishing creditworthiness for borrowers without a credit history.
The standard threshold is a gross debt service (GDS) ratio of 35% and a total debt service (TDS) ratio of 42%. The maximum threshold is a GDS ratio of 39% and a TDS ratio of 44% (recommended minimum credit score of 680). CMHC considers the strength of the overall mortgage loan insurance application, including the recommended minimum credit scores.
The GDS and TDS ratios must be calculated using an interest rate that is either the contract interest rate or the Bank of Canada’s 5-year conventional mortgage interest rate, whichever is greater.
Single advances include improvement costs less than or equal to 10% of the as-improved value.
Progress advances include new construction financing or improvement costs greater than 10% of the as-improved value. With Full Service, CMHC validates up to 4 consecutive advances at no cost. For Basic Service, the Lender validates advances without pre-approval from CMHC.
Non-permanent residents must be legally authorized to work in Canada (with a work permit). Mortgage loan insurance is only available for non-permanent residents for homeowner loans for 1 unit, up to 90% LTV, with a down payment from traditional sources.
Non-permanent residents are not eligible for alternative methods of establishing creditworthiness. In cases where a credit report is not available, a letter of reference from the borrower’s financial institution in their country of origin may be considered.
Learn about mortgage insurance premium costs with our Premium Information for Homeowner and Small Rental Loans.
Contact your Regional Manager, Client Relations or call our Underwriting Centre team at 1-888 GO emili (1-888-463-6454).
This material is a quick reference tool for CMHC’s common Mortgage Loan Insurance. Additional conditions may apply.
This information is subject to change at any time. Please verify with CMHC that you have the most up to date information before the loan is processed.
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