Mortgage Default Insurance
Definition
Mortgage default insurance protects the lender if a borrower stops paying, and is mandatory in Canada when the down payment is less than 20% of the purchase price.
How it works
It is provided by CMHC, Sagen, and Canada Guaranty. The premium is a percentage of the mortgage amount that rises as your down payment falls — roughly 2.8% at 5% down and about 2.8%–4.0% for the highest-ratio cases, dropping to around 2.4% at 10% down and 2.8% or less at 15% down.
The premium is normally added to the mortgage balance rather than paid upfront, so it increases your payment slightly. In some provinces, provincial sales tax on the premium must still be paid in cash at closing.
The insurance protects the lender, not you. Its benefit to the borrower is indirect but real: it allows a purchase with far less than 20% down, and insured mortgages usually carry lower interest rates because the lender's risk is covered.
Quick facts
- Required whenever the down payment is under 20%.
- Premium is usually added to the mortgage balance.
- Insured mortgages often have lower rates than uninsured ones.
Put this into practice
Still have questions about mortgage default insurance?
Call for a free, no-obligation conversation about your situation.
(604) 780-5173