Mortgage Default Insurance

Your guide to mortgage default insurance, also known as CMHC Insurance.

Mortgage default insurance

There are three companies in Canada that offer mortgage default insurance:

  1. CMHC
  2. Sagen (formerly Genworth Canada)
  3. Canada Guaranty

Mortgage default insurance protects lenders in case homebuyers default on their mortgage. No financial loss is experienced by a lender covered with CMHC insurance. The premium is paid by the borrower and is calculated as a percentage of the mortgage amount. The premium does not have to be paid upfront and can instead be added to the total mortgage amount and paid over time. Premiums in Ontario, Manitoba and Quebec are subject to provincial tax, which must be paid upfront.

CMHC Insurance

CMHC insurance plays a very important role in the market and ensures that borrowers receive competitive mortgage rate regardless of their down payment amount. Without it, lenders would likely charge higher rates of interest on mortgages with low down payments to compensate for the higher default risk.

CMHC default insurance rules:

  • Mandatory on down payments between 5% and 19.99%
  • Not available on homes valued at $1 million+ (purchaser must put at least 20% down)
  • Maximum amortization of 25 years (maximum amortization of 35 years is available on non-CMHC insured mortgages
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