High-ratio mortgages

High-ratio mortgages (mortgages with less than 25 per cent Down Payment) must, by law, be insured against Default. Such insurance may be provided by the federal government through the Canada Mortgage and Housing Corporation (CMHC) or through an approved private insurer (such as GE Capital Mortgage Insurance Canada). With Mortgage loan insurance, if you default on your mortgage, the lender is paid back by the insurer.

It should be noted that mortgage loan insurance protects the lending institution only. If you default on your mortgage, and the sale proceeds of your house are not sufficient to pay the outstanding balance of your mortgage, the lending institution will be covered by the mortgage loan insurance. Note that in such a case, you would still lose your house.

Before approving you for mortgage insurance, the mortgage insurer will generally make an Assessment of your credit and may require the payment of an application/Appraisal fee in order to process and confirm approval of the mortgage. This fee covers the insurer's costs associated with that assessment. In some cases, the lending institution may pay this fee.
Normally, the down payment you make must come from your own funds. If you borrow the money (such as on a line of credit, personal loan or credit card), a higher mortgage loan insurance premium applies (see table below).

Home ownership insurance premiums are as follows:

Down Payment

Insurance Premium1
5% down payment, from borrowed funds
3.4%
5% to 9.99% down payment
3.25%
10% to 14.99% down payment
2%
15% to 19.99% down payment
1.75%
20 to 24.99% down payment
1%
1of accepted purchase price (or appraised value, whichever is lower) - as of July 14, 2003


Conventional mortgages (mortgages with at least a 25 per cent down payment) do not, by law, have to be insured. However, there may be instances where mortgage insurance will be required if your loan is considered to be risky. In this case, some lenders may charge a premium of 0.65 per cent if your down payment is between 25% and 34.99%, or 0.5 per cent if your down payment is above 35% (rates as of July 2003).