Apply Now

Mortgage Default Insurance (CMHC Insurance)

Loans Canada: The Country's Best Loan Comparison Platform

Mortgage Default Insurance (CMHC Insurance)

Written by Caitlin Wood

Mortgage Default Insurance (CMHC Insurance)

Mortgage default insurance protects lenders in case borrowers become unable to make their mortgage payments. This type of insurance is available for higher-ratio mortgages if the home’s purchase price is less than $1 million. The maximum allowed time for amortization is 25 years for mortgages that are insured with this type of insurance.

Mortgage Default Insurance Increases Buying Power for Borrowers

Although mortgage default insurance costs buyers extra money, it provides buyers with a huge benefit. The risk of default would increase without this insurance and mortgage rates would be higher. Mortgage default insurance makes it possible for lenders to offer lower mortgage rates because of the protection this type of insurance offers.

Getting lower rates makes it possible for buyers to borrow more money. Buying power increases and buyers can get more in return for the dollars that are invested.

What Companies Offer Mortgage Default Insurance?

There are several insurers that offer this type of insurance. Some of the most popular providers are:

  • Genworth Financial
  • Canada Mortgage and Housing Corporation
  • Canada Guaranty Mortgage Insurance Company

CMHC Mortgage Insurance

Borrowers can obtain this type of insurance through lenders if the insurance is needed.

When is Mortgage Default Insurance Not Required?

Borrowers who can make a down payment equal to 20% of the amount of their loans usually are not required to obtain mortgage default insurance. When this happens, buyers qualify for a conventional mortgage. Of course, there are exceptions to this situation. If a buyer’s salary fluctuates, insurance may be required.

How Much are Mortgage Default Insurance Premiums?

A borrower’s premium is determined by the size of their down payment. Buyers who make larger down payments can expect to pay less. In most cases, payments can range from 0.5% to 3% of the total amount borrowed from the lender.

How is Mortgage Default Insurance Paid?

Borrowers generally finance their mortgage default insurance with their mortgage lender. Mortgage default insurance isn’t like lawyer’s fees, closing costs, or land transfer taxes. Buyers don’t have to make a lump sum payment at the time of purchase. The insurance premium is added to the value of the mortgage. Monthly mortgage payments increase according to the amount that is borrowed.

Why is Mortgage Default Insurance Important?

Most lenders are limiting lending amounts to less than 80% of the property’s value if the mortgage isn’t insured. If a buyer cannot qualify for insurance, then a separate loan must be obtained from a secondary lender to make up the difference. This biggest disadvantage with this type of loan is that interest rates will be higher. Additionally, amortization will be shorter. This leads to larger mortgage payments for buyers. Second mortgages are more expensive than first mortgages. This is especially true when the amount borrowed is greater than 75% of the property’s market value.

Rating of 5/5 based on 1 vote.

Click on the star to rate it!

How useful was this post?

Research & Compare

Canada's Loan Comparison Platform

Largest Lender Network In Canada

Save time and money with Loans Canada. Research and compare lenders before you apply. Share your experiences with Canada's top lenders.

Make Smarter Borrowing Decisions

Whether you have good credit or poor credit, building financial awareness is the best way to save. Find tips, guides and tools to make better financial decisions.

Industry Spotlight

What's happening with Canada's credit industry?

Moves 𑁋 Financial Services For The Independent Worker

Moves 𑁋 Financial Services For The Independent Worker

Fintech startup Moves is helping Canadians, who rely on gig work, gain access to the financing to improve their business and financial future.

Read More
Find The Best Rate
In Your Region
Best Personal Loan Provider by Greedy Rates

Confidential & risk-free

All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster. Loans Canada and its partners will never ask you for an upfront fee, deposit or insurance payments on a loan.

Your data is protected your connection is encrypted.

Loans Canada Services Are 100% Free. Disclaimer

Keep Track Of Your Credit Score

Subscribe with Credit Verify to monitor your credit rating and get your free credit score.