Mortgage default insurance, which is commonly referred to as CMHC insurance, is mandatory in Canada for down payments between 5% (the minimum in Canada) and 19.99%. Mortgage default insurance protects lenders, in the event a borrower ever stopped making payments and defaulted on their mortgage loan.

Although mortgage default insurance costs homebuyers 2.80% – 4.00% of their mortgage amount, it does allow Canadians, who might not otherwise be able to purchase homes, access to the Canadian real estate market. Without it, mortgage rates would be higher, as the risk of default would increase. Lenders are able to offer lower mortgage rates when mortgages are protected by mortgage default insurance, because the risk of default is passed along to the mortgage insurer.

There are some requirements you have to meet in order to qualify for mortgage default insurance:

  • The maximum amortization for insured mortgages is 25 years.
  • If the purchase price is between $500,000 – $999,999 a higher down payment is required. The minimum down payment is 5% of the first $500,000, and 10% of the remaining amount.
  • Mortgage default insurance is not available on homes purchased for more than $1 million; this means that a 20% down payment is required on these homes.

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