Mortgage Insurance

Explore mortgage insurance in Canadian real estate — how it works, who it protects, and what homebuyers need to know when putting less than 20% down.

Mortgage Insurance



What is Mortgage Insurance?

Mortgage insurance protects the lender—not the borrower—in case the borrower defaults on a high-ratio mortgage with a down payment under 20%.

Why Mortgage Broker Fees Matter in Real Estate

In Canada, mortgage insurance is mandatory for insured mortgages. It is typically provided through the Canada Mortgage and Housing Corporation (CMHC), Sagen, or Canada Guaranty.

Key characteristics include:
  • Required for down payments between 5% and 19.99%
  • Premiums are based on the loan-to-value (LTV) ratio
  • Cost is often added to the mortgage principal

Although it protects the lender, it enables buyers to enter the housing market with less capital. Premiums are non-refundable and do not reduce mortgage interest.

Understanding mortgage insurance helps buyers plan for total costs and choose between insured and conventional mortgages.

Example of Mortgage Insurance in Action

A buyer with a 10% down payment pays a 3.1% CMHC insurance premium, which is added to their mortgage balance.

Key Takeaways

  • Required for down payments under 20%.
  • Protects lenders, not borrowers.
  • Premium varies with LTV ratio.
  • Enables lower entry costs for buyers.
  • Offered through approved insurers.

Related Terms

Additional Terms

Recourse Loan

A recourse loan is a type of loan where the lender can pursue the borrower’s personal assets, beyond the collateral, in the event of default.. more

Pari Passu

A pari passu clause is a contractual provision ensuring that multiple creditors share equally in repayment priority from the borrower’s assets.. more

Non-Recourse Loan

A non-recourse loan is a type of loan where the lender’s only remedy in case of default is to seize the collateral property; the borrower is not. more

Net Operating Income

Net operating income (NOI) is the total income generated by a property after operating expenses are deducted but before taxes and financing costs.. more

Mechanic's Lien

A mechanic’s lien is a legal claim by a contractor, subcontractor, or supplier for unpaid work or materials provided for a property.. more

Lis Pendens

Lis pendens is a legal notice filed in the land registry indicating that a property is subject to ongoing litigation that may affect its title.. more

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