At what loan-to-value ratio does a mortgage require default insurance from CMHC or a private insurer?
Correct Answer
B) Above 80%
Mortgages with a loan-to-value ratio above 80% (a down payment of less than 20%) are high-ratio mortgages and must carry mortgage default insurance from CMHC, Sagen (formerly Genworth Canada) or Canada Guaranty. For banks, the Bank Act s. 418 bars residential mortgage loans above 80% of the property's value unless they fall under an exception such as insurance. The insurance protects the lender against borrower default.
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