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Some home buyers in Canada must get mortgage loan insurance. Find out who it protects, what it covers and when it’s required, in the MoneySense Glossary.
Mortgage loan insurance, also called mortgage insurance or mortgage default insurance, is required when a borrower’s down payment on a home is less than 20% of the purchase price. This insurance protects the lender, but the cost—called the “premium”—is paid by the borrower, adding around 1% to 4% to the total loan.
Mortgage loan insurance is not to be confused with mortgage protection insurance (also called mortgage life insurance), when a borrower insures themselves against the inability to pay a mortgage possibly in the cases of injury, sickness or death, so that the mortgage will continue to be paid through the policy.
Example: “Mortgage loan insurance improves housing affordability for consumers, protecting lenders against losses that might result from loans to purchasers who can’t afford a 20% down payment.”
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