CMHC (Mortgage Default Insurance)

Quick Summary

Insurance that protects a lender if a borrower defaults, often required with less than 20% down.

ELI5 Explanation

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It’s insurance for the lender — it helps you buy with a smaller down payment, but you still pay for it.

Detailed Explanation

In Canada, high-ratio mortgages (typically under 20% down payment) require mortgage default insurance. CMHC is one provider; others include Sagen and Canada Guaranty. The premium is usually added to the mortgage. Private mortgages generally do not use default insurance, which is one reason private rates and fees are higher.

Example

A buyer puts 10% down; the lender requires default insurance and the premium is rolled into the mortgage balance.

Why It Matters

It helps explain why bank mortgages can offer lower rates and higher LTVs than private lending.