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I paid money to insure my mortgage with CMHC and wonder why?

by Ginny
(Ontario)

I have recently relocated from the East Coast to Ontario for work. I am making Ontario my permanent home.

I have a home on the East Coast which I fully renovated so that it would sell easier. But, I am having a hard time selling my home.

What are my options, it is costing me money to carry.

I paid money to insure the mortgage with CMHC and wonder why?

If I drop the price much more I won't cover the mortgage.

Any advice?

I am asking you because I really feel like you know this business best. Can I approach CMHC and tell them that I am losing money because the house is not selling?

My real estate agent says it's the best it ever worked.

Comments for I paid money to insure my mortgage with CMHC and wonder why?

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Sep 23, 2014
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starstarstarstarstar 		CMHC
by: Colin

Make no mistake, the CMHC is NOT insurance that protects you, it is there to protect the lender. You pay the premiums to protect the lender. Sound ludacris? The reason your down payment was only 5% instead of 10-15% in the first place is because the bank had insurance. CMHC insurance, that you pay the premiums for, but is there to protect the bank.
Oct 02, 2013
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starstarstarstarstar 		Ginny asks why she insured her mortgage with CHMC
by: Marie Copeland, Mortgage Broker

Ginny, thank you for your contribution to the Axcess Mortgage and Loans website.

First of all, do not sell your East Coast home at a loss unless you are prepared to make up the difference to the lender.

With a high ratio mortgage in Canada, CMHC or Genworth insurance is compulsory, by law. You pay this insurance to protect the lender from your default, not to protect you.

In the event of property sale at a loss, you will have the option to make up the difference to the lender, and the problem is solved.

If, you don't, the lender will make a reasonable effort to collect this shortfall, or some sort of settlement from you.

If they cannot collect their losses from you, then the insurer (whether CMHC or Genworth) will step in and make up the difference to the lender -- but it is possible that the insurer will go after you for their loss. At that point, there may legal costs that will be added to the money you owe.

If they are not able to collect this money from you, it is possible they will take action against you and obtain a Judgement against you. This Judgement will stay with you until it's repaid - it will also prevent you from getting new credit or buy or sell another property -- sooner or later the insurer will collect this money, their legal costs and interest. This Judgement will also be registered on your credit bureau preventing you from getting new financing and to buy a new home for a long time.

So, you see this is not your best option.

Now, to strategies to manage this problem:

If you can't break even or come close to breaking even so that you can cover the difference, then maybe renting is your best option. It sounds that your home is nicely renovated and should be reasonably easy to rent at a profit or at least to break even.

Over time, the rental income will pay down the mortgage leaving you with more equity and easier to sell at a profit.

If you are having difficulty carrying your property while you are looking for a tenant, do not go into arrears but contact your lender promptly. Be honest about your situation and your planned solution -- generally, lenders are willing to work with you if they see you are forthright and have a reasonable plan of action to remedy the situation.

You can ask your lender to temporarily reduce your monthly payments or allow you to skip a few payments until the property rents. Once you have rental income coming in, you can make up the missed payments.

I hope this helps and good luck!

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