If you are one of the many who cannot afford a 20% downpayment, you need to pay for mortgage default insurance. The default insurance actual protects the lender from default, however, the consumer is paying these premiums. The mortgage broker will discuss this with you and explain what your exact premium would be but the average is 2% of the mortgage. However, it is higher if you only have 5% down, the premium is 3.6%. The mortgage loan insurance was developed to help Canadians purchase their first home. You can use if for subsequent homes as well. The Canadian Mortgage and Housing Corporation (CMHC) and Genworth Financial are the two main insurers. They have many programs helping people such as self employed (little declared income), newcomers to Canada, Green home initiatives, and more.

The premiums are added to the total mortgage so it is part of the monthly payment that is amortized for a long period of time (most start with 25 years), in other words, the payment is quite small and you might not see too much of a monthly payment increase for those who only have 10% down compared to someone with an uninsured mortgage with 20% down. What you need to consider is if you purchase a home for $100,000 and have 10% down ($10,000) you would need to pay an insurance premium close to 2% of $90,000 and if you have 20% down your mortgage will be a lot less, $80,000 however, how long would it take you to save that additional $10,000 to be insurance free? Is the premium worth getting that home now rather than a few months, or even year later when you have the full 20% down? This is something to consider and your broker or financial advisor can help you run the numbers to decide.