Mortgage default insurance is required by the Government of Canada when home buyers are putting less than the 20% down payment typically needed to qualify for a conventional mortgage. This type of insurance compensates mortgage lenders for losses caused by a mortgage default. The most common reason for defaulting is not making your mortgage payments.
To be eligible for mortgage default insurance, you will first have to meet your bank’s lending qualifications as well as the underwriting standards of your mortgage insurer. The insurance is offered by a number of mortgage insurers, including Canada Mortgage and Housing Corporation (CMHC).
While this insurance is primarily protecting your lender from losing money if you default, it can also benefit you by allowing you to buy a home sooner with a down payment as low as 5%.*
Other things to know about mortgage default insurance:
Speak to a mortgage specialist to learn more about mortgage default insurance.
* The minimum down payment requirement for mortgage default insurance depends on the purchase price of the home. For a purchase price of $500,000 or less, the minimum down payment is 5%. When the purchase price is above $500,000, the minimum down payment is 5% for the first $500,000 and 10% for the remaining portion. Mortgage default insurance is available only for properties with a purchase price or as-improved/renovated value below $1,000,000.