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Mortgage Insurance

Also called mortgage default insurance, this is insurance that protects the lender in case the borrower defaults on his or her mortgage payments.  If an insured mortgage is in default, and the lender can’t collect from the borrower, the insurer pays the lender back.

Mortgage default insurance is required by most lenders whenever a homeowner puts down less than 20%.  The biggest mortgage insurers in Canada are CMHC, Genworth, and Canada Guaranty–in that order.

Mortgage insurers charge premiums to borrowers to cover the insurance expense.  These fees can range from less than 1% to over 5% of the principal value, depending on the borrower’s mortgage type, loan-to-value, property type, and amortization

The insurance premiums are typically added to the mortgage at the time of closing.  While possible, they are rarely paid in advance.