There are 3 Mortgage Default Insurers in Canada:
- Canada Mortgage and Housing Corporation (CMHC)
- Genworth Financial Canada
- Canada Guaranty (formerly AIG United Guaranty)
Mortgage Default Insurance, commonly known as Mortgage Insurance, is required by Federal law for borrowers if their down payment less than 20% of the value of the property. Also, as a condition for obtaining a mortgage, a financial institution requires two kinds of insurance, mortgage default insurance and property insurance. There are other types of insurance, so for more information go to our article, What Type of Insurance is available for Home Buyers and 1st time home buyer mortgage.
Who does Mortgage Default Insurance protect?
This insurance provides an essential safeguard to the financial system and helps ensure the availability of mortgage funding during times of recession and economic downturns. The lender is protected should there be a default on the mortgage.
How does Mortgage Default Insurance help the homeowner?
Mortgage Default Insurance protects the lender, and as a result, allows borrowers with a low down payment to own a home they may not otherwise qualify for.
Each of the three insurers have an assistance program to help you should there be temporary financial hardship and if you qualify.
CMHC – Canada Mortgage and Housing Corporation
Mortgages insured by CMHC have access to a mortgage professionals who have tools and will work with you to find a solution to your financial situation. Some of the options include adding any missed payments to the mortgage balance and spreading them over the repayment period, special payment arrangements and more.
Genworth Financial Canada
Genworth offers a Homeowner Assistance Program that is designed to help homeowners who are experiencing temporary financial difficulties and in certain situations to seek help from their Homeowner Assistance Specialists. These specialists are trained in identifying the best workout solutions for you. If you qualify, Genworth has a number of options available.
Canada Guaranty has the Homeowners Solution Program for Canadians who find themselves experiencing unexpected financial difficulties. This program stresses the importance of the involvement of the lender and borrower at the first sign of financial distress. This program puts the onus on the lender. The Lender is the one that works with Canada Guaranty to find a workable solution for all concerned using a Canada Guaranty Loss Management expert.
How much does Default Mortgage Insurance cost and when do I pay the premiums?
Your Lender or Mortgage Broker will give you the exact cost of how much of an insurance premium you will pay on your mortgage, but typically premiums are based on your down payment and the percentage of the loan.
Premiums are paid in a lump sum or built in to your mortgage payments.