Mortgage loan insurance protects the lender if you default on your mortgage. The mortgage loan insurance—CMHC and a private insurer offer it—pays back the lender. With the risk of losing their money removed, lenders have the confidence to make mortgage loans of up to 95 per cent of the purchase price of your home.

Mortgage loan insurance is required by law if your mortgage is more than 75 per cent of the purchase price of your home. The lender makes all of the arrangements.

The premium for mortgage loan insurance may be paid in cash when the loan is advanced, or the borrower may choose to add the premium to the mortgage loan principal amount and pay it off over the life of the mortgage. Most borrowers pay the premium off over the life of the mortgage.

The following table illustrates typical mortgage loan insurance premiums, as of May, 2005, for different loan-to-value ratios—the loan as a percentage of the total purchase price.

Canada Mortgage and Housing Corporation (CHMC)

CMHC is Canada’s national housing agency. Established as a government-owned corporation in 1946 to address Canada’s post-war housing shortage, the agency has grown into a major national institution. CMHC is Canada’s premier provider of mortgage loan insurance, mortgage-backed securities, housing policy and programs, and housing research.

CMHC works to enhance Canada's housing finance options, assist Canadians who cannot afford housing in the private market, improve building standards and housing construction, and provide policymakers with the information and analysis they need to sustain a vibrant housing market in Canada.