If you’re looking for a trusted, experienced, and knowledgeable Regina mortgage broker to help a first-time home buyer, I am here to help. No matter what stage you are in the mortgage process, I can assist you in securing financing to get the home of your dreams. I also understand that all those mortgage rules and regulations surrounding the process can be confusing. My team and I are here to answer all your mortgage questions and help you achieve home ownership. In my latest tip, I talk about Mortgage Default Insurance.
Mortgage Default Insurance: What It Is and Why You Might Need It!
For many Canadians, buying a home without a large down payment feels out of reach. Mortgage default insurance—sometimes called CMHC insurance—can make homeownership possible sooner by allowing buyers to purchase with as little as 5 percent down. It’s a helpful tool, but it’s important to understand how it works, when it’s required, and why it exists.
What is Mortgage Default Insurance?
Mortgage default insurance protects the lender—not the homeowner—in case the borrower can’t make their mortgage payments. It doesn’t cover you if you lose your job or have financial difficulties, but it does give lenders the security to approve mortgages with smaller down payments.
In Canada, there are three providers:
- Canada Mortgage and Housing Corporation (CMHC)
- Sagen (formerly Genworth Canada)
- Canada Guaranty
When is it Required?
If your down payment is less than 20 percent of the home’s purchase price, mortgage default insurance is mandatory in Canada. This applies to most high-ratio mortgages (loans that are more than 80 percent of the home’s value).
How Does it Work?
The insurance premium is a one-time cost based on the size of your down payment and the total mortgage amount. It can be paid upfront, but most people choose to add it to their mortgage and pay it off over time.
Typical features:
- Down payment as low as 5 percent for homes up to $500,000 (higher requirements apply above this price).
- Premium rates range from about 2.8 to 4 percent of the mortgage amount, depending on the down payment size. Add .2% for first-time home buyers, extending amortization to 30 years.
- Is added to your mortgage so it doesn’t require upfront cash.
- Saskatchewan PST applies to the insurance premium and is paid for by you as part of the closing costs with the lawyer.
Why It’s Helpful
- Allows homebuyers to purchase sooner without waiting to save a large down payment.
- Gives lenders confidence to offer competitive interest rates on high-ratio mortgages.
- Expands access to homeownership for first-time buyers and those with strong income but limited savings.
Things to Keep in Mind
Mortgage default insurance doesn’t remove your responsibility to make payments. It also comes with rules—like maximum purchase price limits and qualifying requirements—that vary by provider.
Why Work with a Mortgage Broker?
Each insurer (CMHC, Sagen, Canada Guaranty) has slightly different guidelines. A mortgage broker can help determine if you need mortgage default insurance, explain your premium costs, and match you with the lender and insurer that best fit your needs. The goal is to get you into your home with a clear understanding of the costs and benefits—so there are no surprises down the road.
PLEASE NOTE:
Mortgage rules and lender policies change all the time. Because Ryan has access to many lenders and have specialized expertise in structuring mortgage applications, he can determine the optimal way to structure your application to maximize the utilization of things like employment income, self-employment income, Canada Child Benefit income, disability income, maternity leave, down payment sources, credit issues, debt ratios, etc. Choice of lenders, combined with his experience, can make the difference in qualifying and/or securing the amount you want. It’s not just about the best rate, it’s about flexibility and choices.
