Default Mortgage Insurance is an insurance policy which compensates lenders or investors for losses due to the default of a mortgage loan. In Canada, we are fortunate that we have three organizations that offer default mortgage insurance: CMHC – Canadian Mortgage Housing Corporation, Sagen (formerly Genworth), and Canada Guaranty.

Why is this important and a benefit to a borrower?

While these are three distinct companies, they all have the same insurance rates meaning they don’t compete on price. However, they all offer different programs meaning that each insurer will be able to provide specific coverage that can that best meet the needs of borrowers.

In Canada, “The Bank of Canada” dictates that buyers with less then a 20% down payment towards the purchase of a home, their mortgage must be insured. The default insurance premiums are the responsibility of the borrower and the insurance premiums are based on the amount of your down payment (minimum down payment required is 5%) and are added to the mortgage loan requested. This insurance policy covers the mortgage amount for the duration of the mortgage. If the “borrower” defaults in paying the mortgage the lender will be covered for the losses incurred when the mortgage is not paid. This insurance policy does not cover the borrower’s responsibility of paying the mortgage loan it only covers any losses incurred by the lender.

Default mortgage insurance are beneficial to both borrowers and to the financial stability of the Canadian Financial system as it allows a buyer to purchase a home with as little as 5% down payment while still offering protection to the lender should the mortgage ever default.

At Mortgage Sisters West, we treat our homeowners and buyers like family ensuring you are aware of options and choices available to you, and the advice we give is the same we would take for ourselves and our family members.