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If you’re buying a home and have a down payment of less than 20%, you’ll need to purchase mortgage default insurance, also known as mortgage loan insurance or CMHC mortgage insurance (named after the Canada Mortgage and Housing Corporation, one of the three mortgage insurance providers in Canada). In the end, all three terms refer to insurance that protects the lender if you become unable to make your mortgage payments.
Read on to learn how mortgage default insurance works, how much it costs and how to calculate your mortgage insurance premium and fees.
What is mortgage default insurance (CMHC insurance)?
Mortgage default insurance protects the lender if you, as the borrower, stop making your mortgage payments or break the terms of your mortgage contract. It is not the same as mortgage life insurance, mortgage protection insurance or mortgage disability insurance—forms of insurance that help cover the balance of your mortgage if you die or become unable to work due to a serious illness or injury…