If you put less than a 20% downpayment on any home you are purchasing in Canada, you are required to have mortgage insurance added to your loan. This is not an out of pocket expense, but it is added to your mortgage and your balance. There are three companies that offer mortgage insurance in Canada, CMHC, Genworth and Canada Guaranty. All of them have some different rules and policies. It’s important to note that you must also have your loan approved by them in addition to the lender.
There are some situations where you are still required to have insurance even if you put a sizeable downpayment down. These situations can include self-employment, unique property type, etc
Default Insurance doesn’t benefit you, it benefits the lender. If you don’t pay your mortgage, the insurance company agrees to pay back the losses to the lender as a result of your default.
The cost of insurance is described as follows:
A non-traditional downpayment is when you borrow the downpayment. The first table describes the premium you will pay, and the second describes the premium you will pay if you have already owned a house with default insurance on the new amount. For example, should you have a mortgage of $200,000, but are now taking out a mortgage of $300,000 – you would only pay a premium on the difference.
|Up to and including 65%||0.60%||0.60%|
|Up to and including 75%||1.70%||5.90%|
|Up to and including 80%||2.40%||6.05%|
|Up to and including 85%||2.80%||6.20%|
|Up to and including 90%||3.10%||6.25%|
|Up to and including 95%||4.00%||6.30%|
|90.01% to 95% —
Non-Traditional Down Payment**