Many people find it difficult to save such a large amount of cash. For some, it could take years to accumulate such a hefty down payment. Yet, we want the benefits that home ownership provides while we are young and raising our families. CMHC is a Crown corporation that insures high ratio mortgages for lenders. Lenders are required by law to insure all high ratio mortgages.
Mortgage insurance protects the lender in the event that the buyer defaults on the mortgage.
While a purchaser may choose to pay the insurance premium in advance, it is not required. Alternatively, it can be added to the mortgage and paid off as you pay for the home. When you finance a property using a CMHC insured mortgage you are required to demonstrate your ability to provide the agreed upon down payment plus an additional amount of cash to cover closing costs. CMHC requires homebuyers to take a minimum mortgage term of 3 years. They want you to have a fixed payment while you're getting established in your new home.