What does an insurance premium from CMHC typically apply to?

The insurance premium from the Canada Mortgage and Housing Corporation (CMHC) specifically applies to loans with less than a 20% down payment. This type of insurance is designed to protect lenders in the event that the borrower defaults on the mortgage. When a homebuyer makes a down payment of less than 20%, they are considered to be at a higher risk, which is why CMHC requires insurance on such loans. This insurance allows buyers to qualify for a mortgage if they have a smaller down payment, thereby making homeownership more accessible.

In contrast, buying properties without insurance would not involve a CMHC premium, as the insurance is specifically for those lower down payment scenarios. Similarly, properties valued under $500,000 do not inherently trigger a CMHC premium; it's the size of the down payment that determines the need for insurance, not the property value itself. Lastly, the CMHC insurance is not limited solely to rental properties but applies to residential properties where the owner is making a low down payment, thereby making option B the correct interpretation.