Mortgage Default Insurance

The Costs Of Mortgage Default Insurance, And When You Need It

Did you know that if you put down less than 20% of the purchase price of a home, your lender requires you to get mortgage insurance? When purchasing a house, most homeowners must pay an upfront premium for this coverage. The premiums for mortgage default insurance are determined by the amount of downpayment you make on your property. Knowing the costs of mortgage insurance premiums may assist you in determining how much to put up on a down payment.

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What Is Mortgage Default Insurance?

If you’re a first time homebuyer looking to buy a property in Canada, chances are mortgage insurance will be something you’ll need. Mortgage Default Insurance covers the lender in the event that homeowners default on their loan payments and the lender is forced to take possession of the home. Mortgage default insurance allows all Canadians access to the housing market by allowing them to purchase a house with a downpayment as little as 5%. If your down payment is less than 20% of the purchase price, you will be required to obtain mortgage insurance on your loan. Mortgage insurance is only accessible if the purchase price is under $1 million.

What Are The Mortgage Default Insurance Premiums And How Do I Pay For Them?

Your lender will generally have obtained mortgage default insurance and will pass on the premiums to you in addition to your monthly payments or, if you choose, all at once in a lump sum payment. Mortgage default insurance is paid back gradually over the term of the mortgage, with rates ranging from 2.4% to 4% of your entire loan amount depending on how much of a down payment you put towards your home purchase.The insurance premiums in Ontario, Quebec, and Saskatchewan are subject to a provincial sales tax. The provincial tax on these payments, however, must be paid upfront and cannot be added to your loan amount.

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Expected Mortgage Insurance Premiums According to Down Payment Amount

The table below shows the costs of mortgage default premiums you’ll be expected to pay based on how much of a downpayment you have.

Down Payment







Premium on Total Loan







Premium on Increase to Loan Amount for Portability







What If I Don't Get Mortgage Insurance?

In the event of a default, some lenders will insist that you pay mortgage insurance premiums to safeguard the loan. Although you are not required to obtain mortgage insurance, if you have a downpayment of more than 20%, it may be beneficial to do so. If you don’t get mortgage insurance, expect to pay significantly more interest and administration costs. Mortgage insurance can save you money in the long run if you opt for it.

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The Bottom Line

If you are considering buying a home before saving up 20% of the purchase price, take into account that mortgage default insurance premiums will be higher. This is because CMHC insurance rates for less than 20% down mortgages are much higher to compensate for the riskier proposition for lenders. Your mortgage lender should provide information on how much your monthly payment would change if you chose this option. Although you are not required to obtain mortgage insurance when you put down more than 20% of the purchase price, in the long term you may save money on interest and administration fees by purchasing it

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