What is Mortgage Default Insurance?

Diane Buchanan • September 6, 2016

Mortgage Insurance 101.

As part of the home buying process, you will hear the term mortgage insurance  used a lot, especially if you are applying for a mortgage with a downpayment less than 20% of the purchase price. In Canada there are currently 3 mortgage insurers:

Mortgage default insurance, commonly referred to as mortgage insurance, allows borrowers to achieve home ownership in Canada with as little as 5% down.

Simply put, mortgage insurance is an insurance policy that the bank takes out to protect themselves against your defaulting on the loan. They pass the costs on to you, typically it is added to the mortgage balance and included in your regular payments. Here is some information from each of the mortgage insurers.

From Genworth Canada

Transcript from the video A conventional mortgage in Canada normally requires a down payment of at least 20% of the purchase price. When homebuyers have less than 20% for a down payment, Mortgage Insurance allows them to secure a mortgage for their home purchase. Tailored Mortgage Insurance products from Genworth Canada can help you achieve the dream of homeownership sooner and with as little as 5% down. Saving for a down payment is always a great idea. Trouble is, depending on the area, prices may be rising faster than the savings are building up. And, as values rise, the dream home gets further out of reach. This is where mortgage default insurance – more commonly referred to as “mortgage insurance” – can help…by enabling qualified borrowers to purchase a home with as little as a five per cent down payment. If the right home for you has a purchase price of $300K, then lenders will normally require you to provide a down payment of at least $60K. With Mortgage Insurance, you can secure a mortgage with as little as $15K down. Mortgage insurance is a win-win situation for homebuyers and lenders. Lenders rely on it to protect themselves from financial losses in case a loan is not repaid. Because lenders have this protection, they are able to offer loans with smaller down payments, provided credit and legal requirements are met. For homebuyers, this means access to homeownership sooner at a competitive rate, and with a lower down payment.

From The Canadian Mortgage and Housing Corporation (CMHC)

Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with a minimum down payment of 5% — with interest rates comparable to those with a 20% down payment. Here is a pdf with a chart outlining the cost of the insurance premium:

From Canada Guaranty

Consumer tip:  Mortgage insurance is often confused with other types of insurance associated with homeownership. Knowing the difference will help you understand what coverage is appropriate for your specific needs. Mortgage Insurance is not the same as:

  • Homeowner/Property Insurance: A form of property insurance designed to protect the individual’s home (or possessions in the home) against damages, including loss, theft, fire, or other unforeseen disaster.
  • Mortgage Life Insurance: A type of insurance designed specifically to repay any outstanding mortgage debt in the event of homeowner death or long-term disability.

If you have any questions about mortgage insurance, please let me know, I am more than happy to go through this in depth with you!

DIANE BUCHANAN
 Mortgage Broker

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Everything You Need to Know About Second Mortgages

By Diane Buchanan • January 7, 2026
What Is a Second Mortgage, Really? (It’s Not What Most People Think) If you’ve heard the term “second mortgage” and assumed it refers to the next mortgage you take out after your first one ends, you’re not alone. It’s a common misconception—but the reality is a bit different. A second mortgage isn’t about the order of mortgages over time. It’s actually about the number of loans secured against a single property —at the same time. So, What Exactly Is a Second Mortgage? When you first buy a home, your mortgage is registered on the property in first position . This simply means your lender has the primary legal claim to your property if you ever sell it or default. A second mortgage is another loan that’s added on top of your existing mortgage. It’s registered in second position , meaning the lender only gets paid out after the first mortgage is settled. If you sell your home, any proceeds go toward paying off the first mortgage first, then the second one, and any remaining equity is yours. It’s important to note: You still keep your original mortgage and keep making payments on it —the second mortgage is an entirely separate agreement layered on top. Why Would Anyone Take Out a Second Mortgage? There are a few good reasons homeowners choose this route: You want to tap into your home equity without refinancing your existing mortgage. Your current mortgage has great terms (like a low interest rate), and breaking it would trigger hefty penalties. You need access to funds quickly , and a second mortgage is faster and more flexible than refinancing. One common use? Debt consolidation . If you’re juggling high-interest credit card or personal loan debt, a second mortgage can help reduce your overall interest costs and improve monthly cash flow. Is a Second Mortgage Right for You? A second mortgage can be a smart solution in the right situation—but it’s not always the best move. It depends on your current mortgage terms, your equity, and your financial goals. If you’re curious about how a second mortgage could work for your situation—or if you’re considering your options to improve cash flow or access equity—let’s talk. I’d be happy to walk you through it and help you explore the right path forward. Reach out anytime—we’ll figure it out together.

Your Guide to Successfully Navigating the Housing Market

By Diane Buchanan • December 31, 2025
Wondering If Now’s the Right Time to Buy a Home? Start With These Questions Instead. Whether you're looking to buy your first home, move into something bigger, downsize, or find that perfect place to retire, it’s normal to feel unsure—especially with all the noise in the news about the economy and the housing market. The truth is, even in the most stable times, predicting the “perfect” time to buy a home is incredibly hard. The market will always have its ups and downs, and the headlines will never give you the full story. So instead of trying to time the market, here’s a different approach: Focus on your personal readiness—because that’s what truly matters. Here are some key questions to reflect on that can help bring clarity: Would owning a home right now put me in a stronger financial position in the long run? Can I comfortably afford a mortgage while maintaining the lifestyle I want? Is my job or income stable enough to support a new home? Do I have enough saved for a down payment, closing costs, and a little buffer? How long do I plan to stay in the property? If I had to sell earlier than planned, would I be financially okay? Will buying a home now support my long-term goals? Am I ready because I want to buy, or because I feel pressure to act quickly? Am I hesitating because of market fears, or do I have legitimate concerns? These are personal questions, not market ones—and that’s the point. The economy might change tomorrow, but your answers today can guide you toward a decision that actually fits your life. Here’s How I Can Help Buying a home doesn’t have to be stressful when you have a plan and someone to guide you through it. If you want to explore your options, talk through your goals, or just get a better sense of what’s possible, I’m here to help. The best place to start? A mortgage pre-approval . It’s free, it doesn’t lock you into anything, and it gives you a clear picture of what you can afford—so you can move forward with confidence, whether that means buying now or waiting. You don’t have to figure this out alone. If you’re curious, let’s talk. Together, we can map out a homebuying plan that works for you.