What Is a CMHC and What Does It Do?

The Canada Mortgage and Housing Corporation (CMHC) serves as Canada’s national housing agency, playing a significant role in the country’s housing finance system and broader housing landscape. CMHC’s operations support a stable and accessible housing market, ensuring Canadians have access to housing that is affordable, safe, and meets their needs.

Defining CMHC

The Canada Mortgage and Housing Corporation operates as a Crown corporation, wholly owned by the Canadian government but functioning with operational independence. While operating at arm’s length from direct government control, CMHC remains accountable to the Parliament of Canada, ensuring its activities align with public policy objectives and the National Housing Act. Established in 1946, the corporation’s mandate has evolved from its initial focus on providing homes for returning war veterans to encompassing a wide range of housing-related services and initiatives.

CMHC Mortgage Loan Insurance

CMHC’s most widely recognized function is its mortgage loan insurance, which protects approved lenders against losses if a borrower defaults on their mortgage payments. This insurance is mandatory in Canada when a homebuyer makes a down payment of less than 20% of the property’s purchase price. By mitigating lender risk, CMHC mortgage loan insurance enables financial institutions to offer mortgages with lower down payment requirements, making homeownership more accessible.

For properties priced at $500,000 or less, a minimum down payment of 5% is typically required. For homes between $500,000 and $999,999, the minimum down payment is 5% on the first $500,000 and 10% on the remaining portion. CMHC insurance is generally not available for properties with a purchase price of $1.5 million or more.

While the insurance protects the lender, the borrower pays the premium, which can often be added to the mortgage principal. This allows homebuyers to manage upfront costs. The premium percentage typically ranges from 2.8% to 4.0% of the mortgage amount, depending on the down payment size.

To qualify for a CMHC-insured mortgage, at least one borrower must generally have a credit score of 600 or higher. The maximum amortization period for CMHC-insured residential mortgages is typically 25 years, though it can extend to 30 years for first-time homebuyers or purchasers of new construction homes. CMHC mortgage loan insurance is distinct from homeowner’s or life insurance; its sole purpose is to mitigate financial risk for lenders in cases of borrower default.

CMHC’s Broader Mandate

Beyond mortgage loan insurance, CMHC engages in extensive housing research, collecting and analyzing data on housing markets, trends, and affordability. This research provides valuable insights for policymakers, housing developers, and the public, helping to inform decisions that shape the national housing landscape. The corporation also spearheads various affordable housing initiatives, providing funding and support for the development and maintenance of housing units for vulnerable populations. These programs often involve partnerships with provincial, territorial, and municipal governments, and non-profit organizations, to address specific regional housing needs.

CMHC supports the rental housing market through financing and programs aimed at increasing supply and improving affordability. This includes initiatives like the Rental Construction Financing initiative, which encourages the development of new rental units. CMHC also supports housing for Indigenous communities, both on and off reserves. Through various funding streams and collaborative efforts, CMHC works with Indigenous partners to address unique housing challenges and support self-determined housing solutions.