What is Mortgage Default Insurance and how do I know if I need it?

Mortgage default insurance (sometimes called mortgage loan insurance) protects the mortgage lender in case you are not able to make your mortgage payments. It does not protect you.

You must pay for mortgage default insurance if your down payment is less than 20% of the purchase price of your home. This is called a high-ratio mortgage. Your mortgage costs will be higher if you need to get mortgage default insurance.

The premiums for default insurance range from 0.60% to 6.30% of the loan amount. They can be added directly onto the mortgage amount or paid as a lump sum before the mortgage is advanced.

In Canada, mortgage default insurance is provided by three companies: Canada Mortgage and Housing Corporation (CMHC), Sagen and Canada Guaranty.

The maximum amortization period is 25 years for mortgages with mortgage default insurance.