Under Canadian Law, most lending institutions require a DP (down payment) of 25% or more of the purchase price to be eligible for a conventional mortgage. If you have less than 25% DP then your mortgage would be a referred to as a high ratio mortgage and need to be insured.

Some credit unions (which fall under provincial legislation) will provide conventional mortgages up to 85% of the value of the home. Ie.15% DP without requiring insurance.

C.M.H.C. (Canada Mortgage and Housing Corporation) helps homebuyers to own a home sooner and with a lower DP. C.M.H.C. provides mortgage insurance to the lending institution which allows the purchaser to buy with as little as 10% DP or in some cases with a qualified first time buyer, with only 5% DP

An insured mortgage essentially protects the lending institution against a mortgage default by the home owner. Thus the risk to the lending institution is greatly reduced. A benefit of having C.M.H.C insured mortgage is after a 3 year period should interest rates drop you can renegotiate the mortgage to the lower rate and pay only a 3 moth penalty. In most cases, conventional mortgages do not offer this benefit.

Mortgage loan insurance is different than life insurance on the mortgage. Essentially, life insurance on the mortgage means that in the event of death the mortgage principle amount would be paid off in full.

Since not everyone is able to save the required 25% DP for a conventional mortgage, especially in expensive urban areas, this program permits you to enter into the housing market and to start to build equity in your home. C.M.H.C 5% first home loan program has been especially popular as over 350,000 home buyers have used this program since Feb 1992.

The FHLIP is governed by the following criteria:

• You, Your partner or spouse, must not have owner a principle residence in Canada within the previous 5 year period. ( Some relaxation is possible I.e. you where forced to sell your residence due to a marital break-up or for employment reasons)

• The price of the house must be less than $250,000 in Greater Vancouver (includes the Valley out to Abbotsford)

• Payments for : principal, interest, property taxes, heating and 50% of Strata fees must not exceed 32% of your Gross Family Income.

• Total payments for all debt including car payments must not exceed 40% of your Gross Family Income.

• 1.5% of the Closing Costs must be available at the time of application.

If you are NOT a 1^st time homebuyer or the purchase price exceeds the max. then the maximum loan amount is 90% of the first $180,000 and 80% of the amount above $180,000.

You can also add planned renovations to the principal amount of the C.M.H.C mortgage and thus spread the cost of renovations out over the period of the loan at the lower C.M.H.C rate.

There is no free ride. C.M.H.C charges an insurance rate (that is the same across the country). C.M.H.C bases the insurance rate on the amount of DP. The lower the DP, the higher the rate.

Even with only 5% down the rate is a modest 2.5% of the loan amount. Generally the insurance premium is added to the principal amount and amortized over the life of the mortgage. This makes it an affordable option. You can however pay the premium in one lump sum. In addition there is a small application fee charge.

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