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What is an Insured Mortgage?

If you have less than a 20% down payment for a home, you'll need default insurance that (usually) incurs a premium. But, there can be benefits, too. Here's what it can mean for you.

Insurance protects the lender, but gives you some options.

An insured mortgage, often referred to as a high-ratio mortgage, is one that is covered by mortgage default insurance (which is different from private Mortgage Protection Insurance).

You, the borrower, typically pay this type of insurance to protect the lender against default and foreclosure. It's automatically applied to mortgages with less than 20% down payment (a Loan-to-Value (LTV) greater than 80%), though it also may be applied for unique situations, as well.

The upside is that you wouldn't be able to put less than 20% down on a home without it. And, because the mortgage is insured, the lender can offer you other benefits — like a lower rate or more flexible optionsbecause they're protected from default.

You're still on the hook to pay your mortgage.

If you stop paying your mortgage, you would still be on the hook for the loan — and you could lose your property through foreclosure.

If the worst happens, the lender sells the property to recoup its money, and the insurer compensates them for any principal shortfall (for example, if the home is sold for less than the mortgage amount owing). This coverage lowers the lender's risk exposure for the loan, making it more 'secure.'

Without mortgage default insurance, the lender wouldn't consider taking on a 'riskier' mortgage with less down for the loan — so it helps them offer more mortgages to more people. In fact, you can possibly get a mortgage with only a 5% down payment with this type of insurance.

Benefits of your insured mortgage:

  • Access to buying a home with less than 20% down payment (as little as 5% down in some cases)
  • Lenders can offer lower rates with your secured mortgage
  • Despite the lower amount of down payment, you could have access to better mortgage options, such as longer terms or pre-payment privileges

Insured mortgages have home price restrictions (details depend on the provider). Your expert True North Mortgage broker can help you with your application details.

Who offers mortgage default insurance?

Currently, there are three mortgage insurers in Canada:

  • CMHC (Canadian Mortgage and Housing Corporation) is a Crown corporation and the most well-known, so insured mortgages are often called a 'CMHC mortgage'
  • Sagen (formerly Genworth)
  • Canada Guaranty

Your lender will arrange for the purchase of your mortgage insurance with the provider they use.

How do you pay mortgage insurance?

The above providers offer two types of mortgage insurance coverage:

Transactional Insurance (Insured High Ratio Mortgage)

  • A one-time premium is applied to mortgages with an LTV ratio greater than 80% (in unique situations, this premium may also be added to mortgages with lower LTVs)
  • It can be paid as a lump sum or be added to your mortgage to be included in your payments (the amount is added when your mortgage is advanced)
  • If included in monthly payments, the premium is tiered and reduces as more of the principal is paid off. Here is a full breakdown of CMHC's premiums

Portfolio Insurance or Bulk Insurance (Insurable Mortgages)

  • This premium is an option for lenders on mortgages with an LTV of less than 80%
  • It is paid by the lender, with borrowers often not being aware that this coverage has been purchased
  • It is often used by Monoline Lenders (such as THINK Financial, First National, and MCAP) to offer lower mortgage rates
  • To a lesser extent, banks may also consider using this type of insurance

We've got you covered — with great advice and your best rate.

The rules around insured mortgages are subject to change, and there have been several changes in the past few years:

We really know mortgages, and are always up-to-date on the latest changes, for example, to the mortgage stress test, and what they mean for your situation. We can quickly set out all your details. You'll be able to make a clear decision for your best mortgage experience, ever.

A few minutes with True North Mortgage could save you thousands with advice that fits you (not the lender). Give us a shout online, over the phone or drop by a store near you.

Your better mortgage is literally a no-brainer.