Mortgage default insurance, also known as mortgage loan insurance, protects the lender in the event that the borrower does not make their mortgage payments on time. This type of insurance is required in Canada when down payments are less than 20%. It may also be available as a pay-as-you-go policy that compounds into a lump sum payment once the mortgage starts. Most borrowers will not deal with the mortgage insurance company directly but instead, apply for mortgage financing through a lender.
Mortgage Default Insurance in Canada
Mortgage loan insurance is offered by the Canada Mortgage and Housing Corporation. The lender pays for the insurance and then passes the savings on to the borrower. Mortgage insurance premiums are calculated based on the amount of the loan and the size of the down payment. Typically, the larger the down payment, the higher the insurance premium. Fortunately, CMHC provides a mortgage insurance calculator to help homeowners determine how much down payment they can afford to make.
A CMHC-insured mortgage is required if the down payment is less than 20%. A large Canadian bank will not provide an uninsured mortgage if the down payment is less than 20%. This is because the Office of the Superintendent of Financial Institutions (OSFI) oversees all lending institutions’ Mortgage Broker Swindon. If you are considering mortgage loan insurance, it is imperative that you meet the criteria. The Canadian government has set a minimum down payment requirement of 20% for homes that are over $1 million.