1. What is Mortgage Default Insurance?

Mortgage default insurance (also called CMHC insurance) protects lenders if a borrower defaults on their mortgage. It's required in Canada for homebuyers with a down payment of less than 20% of the purchase price.

2. How Does the Calculator Work?

The calculator uses the CMHC insurance formula:

Where:

• \( Mortgage \) — Total mortgage amount in CAD
• \( CMHC\ Rate \) — Percentage based on loan-to-value ratio (down payment size)

CMHC Insurance Rates:

• Down payment 5-9.99%: 4.00% insurance premium
• Down payment 10-14.99%: 3.10% insurance premium
• Down payment 15-19.99%: 2.80% insurance premium
• Down payment 20%+: No insurance required

3. Importance of CMHC Insurance

Details: CMHC insurance enables Canadians to purchase homes with down payments as low as 5%. While it protects lenders, the cost is paid by the borrower and can be added to the mortgage amount.

4. Using the Calculator

Tips: Enter your total mortgage amount and down payment percentage. The calculator will determine your loan-to-value ratio and apply the appropriate CMHC insurance rate.

5. Frequently Asked Questions (FAQ)

Q1: Who provides mortgage default insurance in Canada?
A: The three providers are CMHC (Canada Mortgage and Housing Corporation), Sagen (formerly Genworth), and Canada Guaranty.

Q2: Is CMHC insurance the same as mortgage insurance?
A: No, mortgage insurance protects you (the borrower) if you can't pay, while default insurance protects the lender.

Q3: Can I avoid paying CMHC insurance?
A: Yes, by making a down payment of 20% or more of the purchase price.

Q4: Is CMHC insurance a one-time payment?
A: Yes, it's a single premium that can be paid upfront or added to your mortgage.

Q5: Does CMHC insurance cover the entire mortgage?
A: No, it covers a portion (typically 90-100%) of the lender's losses in case of default.