Canadian Mortgage Default Insurance, commonly known as mortgage insurance, is a type of insurance that protects lenders in the event that a borrower defaults on their mortgage payments. This insurance is typically required when a homebuyer has a down payment of less than 20% of the purchase price of the home.

Here are some key points to explain Canadian Mortgage Default Insurance;:

1. Purpose: The primary purpose of mortgage default insurance is to protect lenders, such as banks and other financial institutions, from financial losses in case the borrower is unable to make their mortgage payments.
2. Down Payment Threshold: In Canada, borrowers are generally required to purchase mortgage insurance if their down payment is less than 20% of the home’s purchase price. This is often referred to as a high-ratio mortgage.  Borrowers with 20% down or more may choose to pay the insurance premium to get a better rate at the time of the application and on subsequent renewals.
3. Insurers: Mortgage default insurance in Canada is provided by Canada Mortgage and Housing Corporation (CMHC), as well as private insurers such as Sagen (formerly Genworth Canada), and Canada Guaranty.
4. Costs: The cost of mortgage insurance is usually borne by the borrower and can be a one-time premium paid at the beginning of the mortgage or added to the mortgage principal.  The premium ranges from 0.60% – 5.85% of the mortgage amount depending upon the mortgage program being applied for.
5. Beneficiary: While the borrower pays for the insurance, the primary beneficiary is the lender. This insurance gives lenders the confidence to provide mortgages to borrowers with smaller down payments.
6. Homeownership Access: Mortgage default insurance plays a crucial role in making homeownership more accessible to a broader range of Canadians by reducing the down payment requirements.
7. Loan-to-Value Ratio (LTV): The loan-to-value ratio is a key factor in determining the need for mortgage insurance. It is calculated by dividing the loan amount by the appraised value of the home.

   If you are looking to purchase your first home, have an upcoming renewal, or need to refinance your existing mortgage, we are here to help!

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