When people hear about mortgage default insurance (often referred to as CMHC fees) they have a negative reaction. People often assume that it is the type of insurance that can be declined, such as life or disability insurance. And of course, most people are against having additional fees added to the cost of purchasing a new home. But, mortgage default insurance is actually a good thing. It allows people to purchase a home with less than 20% of the purchase price as a down payment. Since most people put less than 20% down on their first home purchase, many of us wouldn’t be able to buy a home without mortgage default insurance. 

Although mortgage default insurance is commonly referred to as “CMHC fees”, there are 3 providers of mortgage insurance in Canada: CMHC (www.cmhc.ca), Genworth (www.genworth.ca) and Canada Guarantee (www.canadaguarantee.ca). But, you don’t have to decide between these providers, all of these companies offer the same service and the same rates.

Mortgage default insurance is a ONE-TIME COST that is added to your mortgage. The amount of insurance you pay depends on how much you put as a down payment. The more money you put down, the less risky it is for the bank to loan you the amount of your mortgage, so the less you pay in mortgage insurance. The chart below shows how the cost of the insurance is calculated (if you’re having trouble understanding, call us anytime and we can help!):