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. To understand how it is calculated and paid for, watch the video below.
Although mortgage default insurance costs homebuyers 1.80% – 3.15%1 of their mortgage amount, it is actually beneficial to the buyer 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.
On July 9, 2012, the Canadian government made two key changes to mortgage default insurance regulation:
- 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.
- The maximum amortization period offered on insured mortgages is 25 years.
On May 1, 2014, the Canadian government increased mortgage default insurance premiums by approx. 15%.
Mortgage default insurance rates (CMHC insurance rates)2
To determine which mortgage default insurance premium rate you have to pay, the first step is to calculate how much your down payment is as a percentage of your home’s purchase price. The chart below outlines the premium rates for each down payment scenario:
|Date of Purchase||Down Payment (% of Home Price)|
|5% – 9.99%||10% – 14.99%||15%-19.99%||20% or higher|
|Until April 30, 2014||2.75%||2.00%||1.75%||0.00%|
|As of May 1, 2014||3.15%||2.40%||1.80%||0.00%|
Note: These same rates are charged by all three providers: CMHC, Genworth and Canada Guaranty.
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