Mortgage default insurance, also known as CMHC or Genworth insurance, is a type of insurance that protects lenders in the event of a borrower defaulting on their mortgage. It is required for borrowers who have a down payment of less than 20% of the purchase price of the home. This insurance is for the benefit of the lender, so the borrower is responsible for paying any premiums associated with the insurance.
There are a few things to consider when it comes to mortgage default insurance in Canada. First, the insurance is only applicable to mortgages with a down payment of less than 20% of the purchase price. This means that if the down payment is 20% or more, the mortgage does not require mortgage default insurance. Second, the insurance premiums are based on the amount of the down payment, with lower down payments resulting in higher premiums. Third, the insurance is only applicable to mortgages with a term of 25 years or less. Fourth, the insurance premiums are added to the mortgage balance and included in the monthly payments.
Mortgage default insurance can be beneficial for borrowers who are not able to come up with a 20% down payment. It allows them to buy a home with a smaller down payment and still have access to competitive interest rates. However, it is important to understand the implications of the insurance, such as the fact that it is an additional expense that is added to the mortgage balance and included in the monthly payments.
In conclusion, it is important to understand the implications of mortgage default insurance in Canada. It is applicable to mortgages with a down payment of less than 20%, and the premiums are based on the amount of the down payment. The premiums are added to the mortgage balance and included in the monthly payments. While it can be beneficial in some cases, it is important to understand the implications of the insurance before making a decision.