The Smart Middle Ground: Understanding Insurable Mortgages in Canada

An insurable mortgage in Canada meets these criteria:

• Down payment of 20% or more (loan-to-value ratio of 80% or less).

• Purchase price under $1 million.

• Amortization period of 25 years or less.

• Owner-occupied residence.

• Meets CMHC requirements, like minimum credit score and debt service ratios.

Key points:

• Lenders can choose to insure it, but insurance isn't mandatory.

• The lender pays the insurance premium, not the borrower.

• Interest rates are slightly higher than insured mortgages but lower than uninsured ones.

• Allows lenders to securitize the mortgage, leading to potentially better rates for borrowers.

Insurable mortgages offer a balance between the lower risk of insured mortgages and the higher interest rates of uninsurable ones, giving lenders the option to reduce their risk and offer competitive rates.