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Insured vs Conventional Mortgage

mortgage loan default insurance

If you have applied for a mortgage in the past or are currently looking to purchase real estate and have been shopping around for the best mortgage product, you may have heard about insured or insurable or conventional mortgages.

Insured vs Conventional Mortgage

What is the difference, you may ask, between an insured vs conventional mortgage? Or what is the difference between an insured or insurable mortgage?

In Canada, Federal regulations stipulate that any Chartered Bank or similar financial institution that offers mortgages to the public must insure the mortgage if it is more than 80% of the appraised value of the property. This is called ‘mortgage loan insurance’ or ‘mortgage default insurance’.

When comparing insured vs conventional mortgages, those who put less than 20% down payment must have their mortgage insured against default. This is to protect the lender in the event that the borrower defaults or otherwise cannot make their regular mortgage payments.

Mortgage loan insurance

also known as mortgage default insurance, allows home buyers to provide down payment as low as 5% of the appraised value of the property. For this feature, the applicant of the mortgage will pay a one-time insurance premium amount that gets added to their mortgage. The percentage of the insurance is based on the size of your mortgage. The less down payment the higher your premium.

When comparing insured vs conventional mortgage costs, you can ask your mortgage professional to provide the numbers, such as how much is the insurance premium and how much is your total mortgage and its monthly payments compared to if you were able to provide 20% or more down payment and not pay the insurance premium.

Because the lender is protected against mortgage default, they normally offer lower mortgage rates when the borrower’s mortgage is insured. Once you go above 20% down payment and up to 35% down payment, the lender is no longer protected and for that little higher risk, they will add a premium to the mortgage rates.

‘Insurable’ mortgage

is when you are able to provide 35% or more down payment and borrow 65% or less of the appraised value of the property. The lender will be able to qualify the mortgage application in accordance to the ‘insured’ guidelines, such as making sure that the amortization does not go above 25 years, the purchase price is equal to or less than $1 million dollars, the credit score of the applicant is healthy and strong, and income / employment is verifiable. The lender will provide the same discounted rates as ‘insured’ deals.

’Conventional’ mortgage

is when you are providing between 35% to 20% down payment on an owner-occupied property or investment property. Another item that affects whether the mortgage would be considered conventional or not, is if the purchase price is above $1M.

Who are the mortgage loan insurance providers

In Canada, the largest mortgage loan insurance provider is the Canada Mortgage and Housing Corporation CMHC. They are a Federal Crown Corporation.

There are two other insurance providers in the private sector. They are Canada Guaranty and Sagen. You can click on their links to learn more about them.

Normally, when a mortgage application is submitted to a lender, they decide, after reviewing the application, to which mortgage insurer to send the application to for mortgage insurance approval.


For more information about your mortgage options, and to learn more about insured vs conventional mortgage Contact Us.  We are standing by, ready and looking forward to help you with all your mortgage related questions and requirements.