Mortgage Insurance

Obtaining a large enough downpayment is often the hardest part of buying a home. However, mortgage insurance is able to provide the ability for you to purchase a home with as little as a 5% downpayment.  

In Canada, you are able to obtain two main types of mortgages: conventional mortgages or high-ratio mortgages. A conventional mortgage is a mortgage for no more than 80% of the value of the home, with a downpayment representing the remaining amount. A high-ratio mortgage on the other hand is when you need to borrow more than 80% of the value of the home.

If you are obtaining a high ratio mortgage, those with less than 20% downpayment, your lender will require mortgage loan insurance. This is primarily because the Canadian Bank Act prohibits the majority of federally regulated lenders from providing mortgages that exceed 80% of the value of the home, without mortgage loan insurance. Mortgage insurance protects the lender from potential losses if you default on your mortgage. There are three main mortgage insurers in Canada: the Canada Mortgage and Housing Corporation (CMHC), Genworth Financial Canada and Canada Guaranty.

The cost of mortgage insurance is usually added to the mortgage, and ranges from 1.00% to 3.25% depending on the amount of your down payment. There is an additional 0.25% premium for variable rate mortgages and some mortgage insurers also charge a fee to process an application for a high ratio mortgage.

Talk to your Homeguard agent for more information on mortgage insurance, downpayments and obtaining a mortgage.