What is Mortgage Default Insurance?
Mortgage default insurance is also known as Mortgage Insurance or Canada Mortgage Housing Corporation (CMHC) Insurance. The CMHC provides loan insurance to lenders for homebuyers with a low down payment.
There are two types of mortgage options: conventional mortgages – loans with a minimum of 20 percent down payment, and high-ration mortgages – loans with less than 20 percent down payment.
In Canada, mortgage insurance is required federally on high-ratio mortgages (less than 20 percent down payment). This insurance protects lenders from borrowers who default on mortgage payments. It also gives lenders the opportunity to lend borrowers with low down payments the same low interest rates that they would offer borrowers with more equity.
The insurance price is based on the mortgage amount. It is normally added to the mortgage and is usually paid over the length of the mortgage. The cost of the insurance adds an additional 1 to 3 percent of the overall cost of the mortgage.
Use simple down payment & Mortgage Default Insurance Calculator to determine how your down payment will impact the amount of CMHC default insurance.