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Mortgage Default Insurance



Mortgage default insurance (also known as mortgage insurance) allows you to buy a home with a down payment of less than 20%. You can secure a competitive interest rate with a smaller down payment and have the opportunity to get into the housing market earlier.

Mortgage default insurance is required by the Government of Canada when your down payment is less than 20% and will protect your lending institution in the event that you are unable to make your mortgage payments.


  • How much down payment do I need if I have mortgage default insurance?
    The benefit of this mortgage insurance is that you can buy a home with a minimum down payment of 5% on properties valued up to $500,000. For properties valued between $500,000 and $999,999, you need 5% down for the first $500,000 and 10% down for the remaining portion. Mortgage default insurance is not available for homes worth over $1,000,000 or on mortgages with an amortization period over 25 years.
  • Who provides mortgage default insurance?
    This type of insurance is offered by insurers such as the Canada Mortgage and Housing Corporation (CMHC), Genworth Financial Canada (GE), Canada Guaranty Mortgage Insurance Company or another approved private insurer.
  • Who pays?
    You, the home buyer, pay the mortgage insurance. It’s a one-time charge that you can pay in a lump sum when your mortgage begins or you can have the amount added to your mortgage balance and pay it off over time. There may also be applicable government sales taxes, which must be paid up front. As your lender, BMO will apply for the purchase of mortgage insurance during your approval process.
  • Who is covered?
    Mortgage default insurance covers the lender in the case the homeowner defaults on the mortgage.
  • How much will it cost me?
    Mortgage insurance costs are calculated by multiplying the amount of funds you borrow by the default insurance premium, which typically varies between 0.6% and 6.5%. Your premiums will vary depending on your mortgage amount, the amortization period and the size of your down payment.
    The insurance premium is determined by calculating your loan-to-value (LTV) ratio. You can do this by dividing the amount you’re borrowing by the value of the property. The higher your LTV ratio, the higher your premium will be.
    You can find examples of current mortgage loan insurance premiums at the CMHC.

    Example insurance cost calculation

    Property value$450,000$450,000
    Down payment15% or $22,50010% or $45,000
    Mortgage loan$450,000 - $22,500 = $427,500$450,000 - $45,000 = $405,000
    Amortization25 years25 years
    Loan-to-value ratio$427,500/$450,000 = 95%$405,000/$450,000 = 90%
    Premium$427,500 X 4.00%2$405,000 X 3.10%2
    Default insurance cost$17,100$12,555

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