Mortgage Default Insurance (CMHC)
Mortgage default insurance protects lenders, like banks, from losses in the event of a default on a mortgage by the borrower. It is required for all mortgages where the down payment is less than 20% of the property value. Based on the size of your down payment the Canada Mortgage Housing Corporation (CMHC), or other mortgage default insurance provider, calculates the total cost of the insurance as a percentage of your mortgage loan. Typically this is between 2.50% and 4.00% of the property value.
The total cost of the mortgage default insurance depends on the size of your down payment and the total value of the property. The greater the down payment the lower insurance cost, giving you an incentive to have a larger down payment. The insurance can be paid back in installments, sometimes combined with your mortgage payments, or in a lump sum.
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