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One of the most challenging obstacles to homeownership is saving enough money for a down payment. Thankfully, mortgage default insurance provides a break to homebuyers that enables you to put less money down.


The minimum down payment required to purchase a property is 20% without mortgage default insurance. But, with the insurance, the minimum down payment is 5% for the first $500,000 of the purchase price and 10% for any portion above that threshold. 


The reason why mortgage default insurance is able to lessen the down payment burden for homebuyers is that it provides security to your lender if you’re unable to make your mortgage payments.


While mortgage default insurance is often referred to as ‘CMHC insurance’, government-owned Canada Mortgage and Housing Corporation (CMHC) is just one of three mortgage default insurance providers across Canada. There are also two private companies – Genworth Financial and Canada Guaranty.


Qualifying for mortgage default insurance

Until July 1st, 2020, all three insurance providers required the same qualification standards. But after this date, for CMHC coverage, borrows are now required to meet the following criteria: 

  • Gross Debt Service ratio less than 35
  • Total Debt Service ratio less than 42
  • Credit score at least 680
  • Must not borrow money for down payment


This means it’s easier to quality for mortgage default insurance offerings through Genworth Financial and Canada Guaranty as borrowers must meet these more flexible terms:

  • Gross Debt Service ratio minimum 39
  • Total Debt Service ratio minimum 44
  • Credit score minimum 600


Mortgage default insurance – either payable upon closing or as part of your monthly mortgage payments – is calculated as a percentage of the mortgage loan and is based on the size of your down payment. The higher the percentage of the total home purchase price and amount that you borrow, the higher percentage you’ll pay in insurance (ranging between 2.8%-4% of the total mortgage amount). 


Have questions about mortgage default insurance, or concerning your mortgage in general? Answers are a call or email away!