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When you apply for a mortgage, your lender will take many factors into consideration to determine what level of risk you are as a borrower, including whether you require your mortgage to be insured. Simply put, lenders want to ensure you'll be capable of making your mortgage payments consistently and on time. The federal government, along with lenders, have protocols set in place to reduce the risk of lending. To mitigate risk, borrowers with less than a 20% down payment on the purchase price of their home are required to buy mortgage default insurance.
Does Mortgage Insurance Only Protect the Lender?
No! While mortgage insurance greatly protects the lender, it is also partly there to serve you, the borrower. Putting less than 20% down is considered higher risk, but with mortgage default insurance, the risk upon the lender decreases.
Rather than being stuck with higher interest rates due to a small down payment, mortgage insurance may open you up to more flexible mortgage plans with competitive interest rates. It also allows you to enter the housing market quicker because it lowers your minimum required down payment.
Regulations for Mortgage Insurance
Mortgage insurance can be purchased for a mortgage with a minimum 5% down payment (or 95% loan-to-value of the purchase price).
Example: For a $650,000 home: $500,000 × 5% = $25,000 + $150,000 × 10% = $15,000. Total minimum down payment = $40,000.
Note: Some lenders may require mortgage default insurance on mortgages with a down payment of over 20% for borrowers who are self-employed or have bad credit.
Why Is Mortgage Insurance Required?
When a lender provides a mortgage, they are taking a calculated risk on your ability to pay them back. Life can unexpectedly take a turn — even though a lender may have trusted that you would make payments on time, you may find yourself unable to.
If mortgage payments aren't made on time and you default, the lender will often have to recoup their costs by foreclosing on your property. Mortgage default insurance protects lenders in this situation, allowing them to continue providing mortgages efficiently.
Who Provides Mortgage Default Insurance?
Mortgage insurance can be obtained through one of three main providers in Canada:
Generally, your lender or licensed mortgage broker will have a preferred provider.
Have questions about insured mortgages in canada: requirements, costs & how they work?
Call for a free, no-obligation consultation, or run the numbers first with the mortgage calculators.
(604) 780-5173About the author
Kyle Benzies, Licensed Mortgage Broker
I'm a licensed mortgage broker serving clients across British Columbia, Alberta, and Ontario. I work with a network of over 100 lenders — banks, credit unions, monoline, and alternative lenders — to find financing that fits each client's situation rather than a single institution's product shelf. Everything I publish here is written to explain how Canadian mortgage lending actually works, in plain language.
Published December 8, 2025
