Understanding Mortgage Default Insurance for High-Ratio Mortgages

The Government of Canada requires mortgage default insurance when home buyers put less than the 20% down payment. This type of insurance reimburses mortgage lenders for losses because of a mortgage default. The most common reason for defaulting is not being able to make your monthly mortgage.

mortgage default insuranceWhen the down payment is less than 20%, borrowers are considered to be more of a high-risk borrower (high-ratio.) This is because there is not much equity in your home, therefore the risk of default is higher.

To be eligible for mortgage default insurance; you will first have to meet your lending qualifications, as well as approved standards of your mortgage insurer. This insurance is offered by a number of mortgage insurers, Canada Mortgage and Housing Corporation (CMHC), Genworth and Canada Guaranty.

While this insurance primarily protects your lender from losing money, it can also benefit you by allowing you to put a down payment as low as 5%.

Additional Information:

  • Provides protection to the mortgage lending institution only; it does not protect you or your interest in the property.
  • It does not cover your mortgage payment if you’re unable to pay it or if you pass away. Learn more about our Mortgage Protection Plan.
  • Only available for residential homes priced under $1,000,000.
  • The premium is calculated as a percentage of the amount borrowed.
  • The bigger your down payment, the lower your premium will be. Amortization period, property value, type of occupancy, and owner’s employment also factor into the premium’s calculation.

Speak to a Sunlite Mortgage Specialist to learn more about mortgage default insurance.

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