Understanding Mortgage Default Insurance
Mortgage default insurance (often called CMHC insurance) is required when you have less than 20% down payment.
What Is Mortgage Default Insurance?
Purpose:
Protects the LENDER (not you) if you default on your mortgage. Allows lenders to offer mortgages with lower down payments.
The Three Providers
| Provider | Market Share | Notes |
|---|---|---|
| CMHC | ~50% | Crown corporation, largest |
| Sagen (formerly Genworth) | ~35% | Private, competitive |
| Canada Guaranty | ~15% | Private, growing |
Premium Rates
| Down Payment | LTV | Premium Rate |
|---|---|---|
| 5% | 95% | 4.00% |
| 10% | 90% | 3.10% |
| 15% | 85% | 2.80% |
| 20%+ | 80% or less | Not required |
Premium Calculation Example:
- Home Price: $500,000
- Down Payment: $25,000 (5%)
- Mortgage: $475,000
- Premium: $475,000 × 4.00% = $19,000
When Insurance Is Required
Must Be Insured:
- Down payment less than 20%
- Maximum 25-year amortization
- Purchase price under $1 million
Advantages of Insured Mortgages
Better Interest Rates:
Insured mortgages often 0.10-0.25% lower than conventional.
Lower Down Payment:
Access homeownership sooner with 5-10% down.
Frequently Asked Questions
Can I choose my mortgage insurer?
Generally no, the lender decides. All three have similar premiums.
Is the premium tax-deductible?
For personal residences, no. For rental properties, it may be deductible.
Does mortgage insurance cover me if I die?
No, this is completely different from mortgage life insurance.
Calculate your mortgage with insurance costs.
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