What type of insurance is required when an Alberta buyer makes a down payment of less than 20% of the purchase price?
Correct Answer
D) Mortgage default insurance (e.g., CMHC, Sagen, or Canada Guaranty)
When the down payment is less than 20%, the mortgage is considered high-ratio and federal regulations require mortgage default insurance. In Canada, this insurance is provided by CMHC, Sagen (formerly Genworth), or Canada Guaranty, and the premium is typically added to the mortgage amount.
Why This Is the Correct Answer
Option D correctly identifies mortgage default insurance as the required coverage. When the down payment is less than 20%, the mortgage is classified as high-ratio, and federal regulations mandate mortgage default insurance to protect the lender against borrower default. The three approved providers are CMHC, Sagen (formerly Genworth), and Canada Guaranty.
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