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Mortgage default insurance, commonly referred to as "mortgage loan insurance" and sometimes "mortgage insurance" helps buyers buy a home sooner and with a lower down payment. So if you have less than a 20 per cent of the purchase price of your home you'll have to purchase mortgage default insurance. With this type of insurance a home can be purchased with as little as five per cent down payment for qualified borrowers.

Mortgage default insurance regulation and premium rates are the same across Canada. Insurance premium rates range from 1.80% to 4.00% of your mortgage amount. The maximum amortization period for mortgages with mortgage default insurance is 25 years.

The mortgage loan insurance premium depends on the purchase price of the home and can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments. Since a great number of home buyers can’t afford to pay mortgage default insurance in cash, this cost is typically added to the mortgage amount and amortized over the length of your mortgage.

Keep in mind that mortgage default insurance does not protect you as the homeowner, it actually protects the mortgage lender should you default on your mortgage payments. Mortgage default insurance is completely avoidable and the amount you pay for this insurance is determined by the amount of the mortgage loan and the size of your down payment. Say, for example, you wanted to buy a house listed at $300,000 and amortization period of 25 years. If you only had five per cent down payment ($15,000) saved for your purchase, you’d end up paying an additional $11,400 in mortgage insurance. But if you saved 20 per cent ($60,000) you wouldn’t pay anything in mortgage default insurance. Try out this handy Premium Calculator.

For a purchase price of $500,000 or less, the minimum down payment is 5%. When the purchase price is above $500,000, the minimum down payment is 5% for the first $500,000 and 10% for the remaining portion.

NOTE: Mortgage loan insurance is available only for properties with a purchase price or as-improved/renovated value below $1,000,000.

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