Mortgages

Mortgages, as we know them today, have a rich and complex history that spans centuries and civilizations. They’ve evolved from simple arrangements of debt to

Mortgage loan insurance protects the mortgage lender if you can’t make your mortgage payments. It doesn’t protect you. Mortgage loan insurance is also sometimes called

Put simply, mortgage insurance is supposed to protect your mortgage lender in case you cannot make your mortgage payments. So who has to get mortgage insurance, and more importantly, who pays for it?
 
In Canada, mortgages with a down payment of less than 20% are required by the government’s Office of the Superintendent of Financial Institutions (OSFI) to also buy mortgage insurance. The idea is that the smaller the down payment, the higher the risk that a borrower is not able to repay their loan. However, even if you do come up with a 20% down payment, your lender may still ask you to buy mortgage insurance. This is the case if you have a poor credit history or are self-employed without a regular source of income to cover your mortgage payments. This system works in favor of borrowers as well. Having an insured mortgage means that even people struggling to save up to put 20% down can buy a property with a smaller down payment. For instance, to buy a property of $500,000 or less, an insured mortgage means that you can get away with coming up with a minimum down payment of 5%. Mortgage insurance does not apply to properties worth more than $1 million.
 
So if the mortgage insurance is to protect your lender against the risk of you defaulting on your mortgage payments, is the lender to pay for it? Technically, yes and no. On paper, it is your lender who will be the one paying for the mortgage insurance but usually, these costs are passed on to you either through adding it to your regular mortgage payments or having you pay a lump-sum upfront.