Costs and closing
Mortgage default insurance
Insurance that protects the lender if you default, required with less than 20% down and paid for by you.
Also called CMHC insurance, mortgage loan insurance.
Default insurance protects the lender, not you. If you default and the lender loses money on the sale, the insurer covers the shortfall, and it can then come after you for that amount. It isn't life insurance or job-loss insurance.
It's required whenever the down payment is under 20%. Premiums are 4.00% of the mortgage at 5 to 9.99% down, 3.10% at 10 to 14.99% and 2.80% at 15 to 19.99%, plus 0.20% if the amortization is longer than 25 years. The premium is added to your mortgage, so you don't pay it in cash.
Canada has 3 default insurers: CMHC, Sagen and Canada Guaranty. The lender chooses which one to use.
In Ontario, Quebec, Saskatchewan and Manitoba, provincial sales tax on the premium is due in cash at closing. Alberta doesn't charge it.
Related terms
Conventional mortgage
A mortgage with a down payment of 20% or more, which doesn't need default insurance.
Insurable mortgage
A mortgage with 20% or more down that the lender can still insure in the background, priced between insured and uninsured.
Loan-to-value (LTV)
The mortgage as a percentage of the property's value, which decides your insurance, your pricing tier and how much you can borrow.
This definition describes how the term is used in Canadian residential mortgage lending. It’s general information, not advice on your file. Rules, thresholds and rates change. Where a figure is quoted, it’s current as of the date shown on the related guide.
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