Mortgage Default Insurance

In Canada, high ratio mortgages are insured by Canada Mortgage and Housing Corporation (CMHC), GE and AIG. Since the chances of default are greater for mortgages of a high value relative to the value of the home, borrowers are required to purchase CMHC or GE insurance, which adds to the cost of the mortgage.

The cost of the insurance increases as the percentage to be financed increases and the ammortization increases, up to about 3.75% of the mortgage amount.

For borrowers who choose a high ratio mortgage, the CMHC or GE insurance is an additional cost that must be paid. Insurance premiums can be added to the mortgage and amortized over the life of the mortgage, rolling the insurance premiums and mortgage payments into one convenient monthly payment. Insurance premiums can also be paid for upfront, saving thousands in interest costs on the premium.