Which type of mortgage insurance is required when a borrower has a down payment of less than 20%?
Correct Answer
B) Mortgage default insurance
Mortgage default insurance (also called mortgage loan insurance) is required when the down payment is less than 20% of the price, because the loan then exceeds 80% of the property's value. It protects the lender if the borrower defaults and is provided by CMHC, Sagen or Canada Guaranty.
Why This Is the Correct Answer
Mortgage default insurance is the insurance required when the down payment is below 20%, because the loan-to-value ratio is then above 80%. It protects the lender and is available from CMHC, Sagen or Canada Guaranty.
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