Mortgage Insurance

Mortgage Insurance in Canada

Mortgage insurance is a vital aspect of homeownership in Canada, providing protection for both lenders and borrowers. In this blog, we’ll explore what mortgage insurance in Canada is, its importance, the types available, and how it works within the Canadian context.

What is Mortgage Insurance?

Mortgage insurance, commonly referred to as mortgage default insurance, is designed to protect lenders if a borrower defaults on their mortgage. In Canada, this type of insurance is typically required when the down payment on a home is less than 20% of the purchase price. This insurance mitigates the risk for lenders, enabling them to offer loans to a broader range of homebuyers, including those with lower down payments.

Why is Mortgage Insurance Important?

Mortgage insurance in Canada serves several crucial functions:

  1. Risk Management for Lenders: By reducing the risk associated with low down payment loans, lenders are more willing to offer mortgages to individuals who might not otherwise qualify.
  2. Increased Accessibility for Borrowers: It allows potential homeowners to purchase property with as little as a 5% down payment, making homeownership more accessible to a wider population.
  3. Economic Stability: By providing a safety net for lenders, mortgage insurance helps stabilize the housing market, which is a significant component of the Canadian economy.

Types of Mortgage Insurance in Canada

There are two primary types of mortgage insurance in Canada:

  1. Mortgage Default Insurance: This is the most common form and is required for high-ratio mortgages, where the down payment is less than 20%. The premiums for this insurance can be added to the mortgage amount or paid in a lump sum at closing.
  2. Mortgage Life Insurance: This optional insurance pays off the remaining mortgage balance if the borrower dies. While not mandatory, it offers peace of mind to homeowners knowing their loved ones won’t be burdened with mortgage debt in the event of their untimely death.Mortgage Insurance in Canada

How Does Mortgage Insurance Work?

When you purchase a home with less than a 20% down payment, the lender will typically require you to obtain mortgage insurance through one of the three main providers in Canada: the Canada Mortgage and Housing Corporation (CMHC), Genworth Financial, or Canada Guaranty. The cost of this insurance is calculated as a percentage of the loan amount, which can range from 0.6% to 4.5%, depending on the size of your down payment.

For instance, if you’re buying a $400,000 home with a 10% down payment, your mortgage amount would be $360,000. If the mortgage insurance premium rate is 2.4%, your mortgage insurance cost would be $8,640. This amount can be added to your mortgage balance, increasing your total loan to $368,640.

Benefits of Mortgage Insurance

While the additional cost might seem like a burden, mortgage insurance in Canada offers several benefits:

  1. Lower Down Payments: It allows buyers to enter the market sooner without needing to save for a 20% down payment.
  2. Potential for Lower Interest Rates: Since the insurance reduces lender risk, it may result in lower interest rates for the borrower.
  3. Broader Homeownership Opportunities: By making it possible for more people to secure financing, it supports the goal of increasing homeownership across the country.


Mortgage insurance is an integral part of the Canadian housing market. It provides essential protection for lenders and opens up opportunities for buyers, especially those who cannot afford a large down payment. By understanding how mortgage insurance works and its benefits, prospective homeowners can make informed decisions about their mortgage options.

For more detailed information about mortgage insurance in Canada, visit the Super Visa Insurance Monthly website.