CURRENT RATES

5 Year Mortgage Rates
Term TypeRatePromo & Info
5 YearFixed (standard)2.49%
5 YearFixed (promo)2.29%-*call for restrictions
-High Ratio Only
-Meet property guidelines
5 YearFixed (promo)2.49% & -Condo Doc Review, Reimbursement $500 *call
5 YearVariable (promo)2.10%
* Subject to change without notice *OAC *Some Underwriting Restrictions Apply
Our Mortgage Rates
TermTypeRate
2 YearFixed2.19%
3 YearFixed2.29%
4 YearFixed2.39%**High Ratio Only
5 YearFixed2.29%**restricted, call for details
6 YearFixed2.99%
7 YearFixed2.99%
10 YearFixed3.54%

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MORTGAGE DEFAULT INSURANCE

What is Mortgage Default Insurance?

It’s really an insurance policy for lenders that provides protection to them in case the borrower/mortgagor defaults on their mortgage obligations. This is not to be mistaken with a homeowner’s insurance policy which is entirely different. In Canada the Bank Act requires that lenders/banks providing mortgages in excess of 80 percent of the value of a home be insured (another way of saying this is that if you have less than 20% of the purchase price as a down payment)

The cost of this insurance is passed onto the borrower who would have the choice of paying the mortgage default insurance premium in one lump sum, or simply adding it the basic mortgage amount and paying it off over time. Premiums are based on loan to value of a property, amortization, as well as product type so it is important you have the correct premium if you are working scenarios on a mortgage calculator.

The benefit is not just for the lender. Sure it only protects the lender in case of default, however, without mortgage default insurance it would be unlikely for borrowers to obtain competitive rates with down payments as small as 5% of the purchase price.

Recent changes to Federal legislation by the Government of Canada have resulted in tightening of guidelines on the mortgage products eligible for insurance. Amortizations have recently been reduced to 25 years (down from 40 years only a few short years ago), maximum mortgage amounts of $1,000,000, as well as more strict debt service ratios used in calculations to approve loans.

Who Provides Mortgage Default Insurance?

There are three options in Canada at the moment which include: Genworth, Canada Mortgage and Housing Corporation, and Canada Guarantee. It is important to note that not all lenders partner with all three mortgage insurance providers, and, as such, mortgage default insurance, and product selection may differ from lender to lender.

Can Mortgages Less Than 80% Loan To Value Require Insurance?

Yes! There may be special products or situations that a require mortgage default insurance even if your down payment is greater than 20% of the purchase price. In fact some Trust companies have policy that may require mortgage default insurance on loans that are greater than 65% loan to value. Though lenders may be governed by the same set of rules they are free to set their own lending policy and guidelines and because of this you will see different mortgage products and different policy on mortgage default insurance.

How Does Mortgage Default Insurance Work?

It is kind of like it sounds…If the borrower (mortgagor) goes into default whereby they stop making payments or breach the terms of the mortgage in another way, the lender would be entitled to take actions available under the terms of the mortgage to recover the money owed under the loan. A process would be followed whereby a demand letter would be sent, followed by a statement of claim in court, and subsequent actions pursued by legal counsel in an effort to recover the balance of the loan amount, legal costs etc. If there is a shortfall and not all costs are recovered by the lender, then subject to any limitations outlined in advance by the insurer, the difference could be collected by the lender from the insurer.

With the scenario above, there could be further liability to the borrower/mortgagor in addition to the property that was provided as security whereby the insurer may choose to take legal action to recover their loss from the borrower/mortgagor even if the property has already forfeited or sold. Of course, there are laws in place to govern such occurrences.

How do Mortgage Default Premiums Work?

It has already been indicated that there are two options to pay your premium

1. Lump it into your mortgage

2. Pay your premium up front

Example: Purchaser is buying a condo for $300,000 and has a down payment equal to 5% of the purchase price, or, $15,000. $300,000 Purchase Price minus the $15,000 down payment leaves a mortgage amount of $285,000.

  • $285,000/$300,000 = 95% Loan to Value
  • 95% is greater than the 80% loan to value maximum allowed for conventional mortgages, and therefore requires mortgage default insurance
  • The premium for 5% down payment with a 25 year amortization would currently be 2.75%
  • Mortgage Amount $285,000 * 2.75% = $7,837.50 Insurance Premium
  • Option 1 – Adding the premium to the mortgage.
    $285,000 Basic Loan Amount + $7,837.50 Insurance Premium = $292,837 Total Mortgage Amount
  • Option 2 – Paying the premium up front
    You would simply come up with the $7,837.50 Mortgage Insurance Premium and your mortgage amount would remain $285,000

What Are the Mortgage Insurance Premiums?

As the premiums can change, and can grow more complicated with varying mortgage products it is best to obtain premiums from your broker, and/or check the premium rate charts available online from each of the Insurance providers.