CMHC Portability

For straight portability, the following 3 criteria must be met:

• The amortization period of the new loan cannot exceed the amortization remaining from the original loan (up to a maximum of 25 years).
• The new loan-to-value (LTV) is equal to or less than the current LTV of the existing property.
• The new loan amount is equal to or less than the current outstanding balance.

Example

A property was purchased 3 years ago for $200,000 at 90% LTV. The current outstanding balance is $172,000.

• The new property purchase price is $210,000
• A new mortgage is sought for $172,000, and the amortization will be maintained at 22 years.

What is the premium to be charged?

• Outstanding balance = $172,000. New loan $172,000. This means no new money.
• Current property LTV (original purchase price) = $172,000 / $200,000 = 86%.
• New property LTV = $172,000 / $210,000 = 82% & therefore LTV has decreased.

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:

• The maximum amortization will be the greater of the remaining amortization from original loan (up to a maximum of 25 years) or blended amortization (a blended amortization period is subject to a 0.60% surcharge which is applied to the Increase to Loan Amount).**
• The maximum new loan-to-value (LTV) is 90% (CMHC may consider a higher LTV ratio, up to 95%, when the new LTV ratio is equal to or less than the original LTV ratio – at the time of the original purchase).

Example

A property was purchased 5 years ago for $200,000 at 90% LTV with a 25-year amortization.

• The outstanding balance is $162,000
• The property was just sold and a new one will be purchased for $300,000 at 90% LTV but the amortization will be maintained.

What is the premium to be charged?

• Outstanding balance = $162,000. New loan $270,000, which means $108,000 new money.
• Current property LTV:  $162,000 / $200,000 = 81%.
• New property LTV= $270,000 / $300,000 = 90%. LTV slightly increased.
• Amortization remains in line.

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

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.

Example

A property was purchased 8 months ago for $200,000 at 90% LTV. The current outstanding balance is $182,000.

• The new property purchase price is $225,000.
• A new mortgage is sought for $210,000 and requires an amortization of 25 years.

What is the premium to be charged?

• Amortization needs to be extended to 25 years. No top-up option is available
• New property LTV = $210,000 /$225,000 = 93%; LTV>90%. No top-up option is available.
• Previous purchase within 2 years of new purchase = Port credit!

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.