Mortgage Insurance
Mortgage insurance is two different things wearing one name, and confusing them costs buyers money. Mortgage default insurance is mandatory when you buy with less than 20% down, and it protects your lender. Mortgage protection insurance is optional, and it protects you and your family. One is a requirement you should try to minimize; the other is a decision you should make deliberately. We help you understand both, show you what they really cost, and structure your purchase so you don’t pay a dollar more than you need to anywhere in the Fraser Valley.
In Canada, mortgage default insurance is required when your down payment is less than 20% of the purchase price. It protects the lender if the borrower defaults, not the borrower.
That sounds one-sided, but the practical benefit to buyers is real. Without default insurance, federally regulated lenders could not offer mortgages with less than 20% down at all. Insurance is what allows a buyer with 5% down to purchase a home years earlier than they otherwise could, and insured mortgages often carry some of the lowest interest rates in the market.
Three companies provide mortgage default insurance in Canada: CMHC, Sagen and Canada Guaranty. Your lender selects the insurer, and their premium rates are generally the same.
Premiums are a one-time charge calculated as a percentage of your mortgage amount, based on your loan-to-value ratio. With 5% to 9.99% down, the premium is 4.00%. With 10% to 14.99% down, it is 3.10%. With 15% to 19.99% down, it is 2.80%. The premium is usually added to your mortgage balance rather than paid in cash.
Eligible first-time buyers and buyers of newly built homes who choose a 30-year amortization pay an additional 0.20% premium surcharge.
A useful note for BC buyers: provincial sales tax is charged on the premium in Ontario, Quebec and Saskatchewan, and that tax must be paid in cash at closing. British Columbia does not charge PST on mortgage default insurance premiums, so Langley buyers do not face this extra closing cost.
This is one of the most valuable things on this page, and most buyers never hear it.
Increasing your down payment from 9.5% to a full 10% moves you from the 4.00% premium tier to the 3.10% tier. On a typical Langley purchase, that extra half a percent of down payment can save several thousand dollars in premium, often far more than the additional cash you put down.
The same applies at the 15% threshold. We check these thresholds on every file before it is submitted, because the savings are significant and easily missed.
The insured price cap is $1.5 million, raised from $1 million in December 2024. Homes purchased for $1.5 million or more are not eligible for default insurance, so a minimum down payment of 20% of the full purchase price is required regardless of your profile.
For homes under $1.5 million, the minimum down payment is tiered: 5% of the first $500,000 and 10% of the portion between $500,000 and $1.5 million.
Insured mortgages have a maximum amortization of 25 years. Since December 2024, first-time home buyers and buyers of newly built homes can choose an amortization of up to 30 years.
Default insurance protects your lender. Mortgage protection insurance protects you and your family.
These optional policies can pay down or pay off your mortgage if you pass away, or cover payments if you suffer a critical illness or disability, so your family can stay in the home if your income stops.
The key difference is who owns the coverage. Lender-offered creditor insurance is owned by the lender, the lender is the beneficiary, and the coverage typically shrinks as your mortgage balance goes down. An individually owned policy, such as term life insurance, is underwritten for you personally, generally keeps a fixed coverage amount, and pays the beneficiary you choose, usually your family. We explain the difference so you can make an informed choice.
Bank staff explain the premium you must pay. We show you how much you may be able to save.
That matters most at the tier thresholds, where a small increase in your down payment can save far more than it costs. Nobody flags this unless they are looking for it.
You also get a broker who compares insured mortgage pricing across multiple lenders rather than one. Insured mortgages often carry some of the most competitive rates in the market, and it pays to shop them properly.
Whether you are buying with 5% down or reviewing protection coverage on an existing mortgage, it’s important to get the details right before committing.
Call (778) 512-5514 or request a consultation. We will calculate your premium, explain your protection options clearly and identify any threshold savings you may be eligible for, at no cost. We work with buyers throughout Langley, Delta and Abbotsford.
