Under current regulations, what is the maximum purchase price for a property that can have CMHC-insured financing?

Q: What is the correct answer to: Under current regulations, what is the maximum purchase price for a property that can have CMHC-insured financing?

The correct answer is $1,000,000. Option B ($1,000,000) is correct as it represents the current maximum purchase price threshold for CMHC mortgage default insurance eligibility. This limit is established under federal mortgage insurance regulations and applies to all CMHC-insured mortgages. Properties purchased for $1,000,000 or less can qualify for CMHC insurance with down payments as low as 5% (for purchases up to $500,000) or varying percentages for higher amounts within the threshold. This regulatory limit ensures government-backed mortgage insurance focuses on more affordable housing segments while requiring conventional financing for luxury properties.

Q: What background knowledge is needed for this Mortgage & Real Estate Finance question?

CMHC (Canada Mortgage and Housing Corporation) mortgage default insurance protects lenders against borrower default on high-ratio mortgages. This government-backed insurance enables borrowers to purchase homes with down payments as low as 5% for properties up to $500,000, with scaled requirements up to the $1,000,000 threshold. Above this limit, borrowers must use conventional financing with minimum 20% down payments. The threshold reflects federal housing policy balancing homeownership accessibility with fiscal responsibility. Other mortgage insurers (Genworth and Canada Guaranty) follow similar thresholds. This system supports first-time buyers and those with limited savings while ensuring government insurance focuses on affordable housing segments rather than luxury properties.

Q: What is a good way to remember the answer to this Mortgage & Real Estate Finance question?

Remember 'CMHC stops at a Million' - visualize CMHC insurance as an elevator that can only go up to the million-dollar floor. Above that floor, you need to take the 'conventional stairs' with your own 20% down payment to reach higher-priced properties. When you see CMHC insurance questions, immediately think of the million-dollar ceiling. Any amount above $1,000,000 automatically eliminates CMHC insurance as an option, while amounts at or below qualify for potential CMHC coverage.

Q: What exam tip applies to this Mortgage & Real Estate Finance question?

Look for the $1,000,000 threshold in mortgage insurance questions. Amounts above this require conventional financing, while amounts at or below may qualify for CMHC insurance with lower down payments.

Q: How does this Mortgage & Real Estate Finance concept apply in real world practice?

A client wants to purchase a $1,100,000 home with a 10% down payment and asks about CMHC insurance. You must explain that the property exceeds the $1,000,000 CMHC threshold, requiring conventional financing with a minimum 20% down payment ($220,000). The client needs an additional $110,000 down payment or must consider properties under $1,000,000 to access CMHC insurance with their current 10% down payment capacity.

Question

Mortgage & Real Estate FinanceCmhc InsuranceHARD

Under current regulations, what is the maximum purchase price for a property that can have CMHC-insured financing?

Answer Options

A

$750,000

B

$1,000,000

C

$1,250,000

D

$1,500,000