Glossary
Canada Guaranty
Canada Guaranty is a private company approved to provide mortgage default insurance in Canada, backing high-ratio mortgages alongside CMHC and Sagen..
Canada Guaranty is a private Canadian mortgage default insurance company — one of the federally approved insurers that can back a high-ratio mortgage when a buyer's down payment falls below the standard threshold. It operates in the same Canadian market as CMHC and Sagen.
Where it fits in the Canadian market
Mortgage default insurance is required on high-ratio mortgages, meaning loans above 80% of the property's value, which corresponds to a down payment of less than 20%. Three insurers are approved to provide it: CMHC, a federal Crown corporation; Sagen; and Canada Guaranty, a private company. Federal approval matters because insured mortgages must follow government rules covering maximum loan-to-value, amortization length, and property value.
The insurance protects the lender, not the borrower. If a borrower defaults and the home sells for less than the outstanding balance, the insurer reimburses the lender for the shortfall. Lenders decide which approved insurer a file is placed with, so borrowers rarely choose. The premium, however, is normally passed on to the borrower — paid upfront at closing or capitalized into the mortgage balance. Premiums are tiered by loan-to-value and amortization, so smaller down payments and longer amortizations generally cost more.
Why it matters to a borrower
Because the premium is often added to the mortgage, it increases the principal and the total interest paid over the amortization period. Insured mortgages let buyers qualify with a smaller down payment while giving lenders the comfort to price competitively. The trade-off is stricter qualification, since insured mortgages must pass the federal mortgage stress test at a rate above the contract rate.
- Down payment under 20%: default insurance required, arranged by the lender with an approved insurer.
- Down payment of 20% or more: a conventional mortgage, so default insurance is not required.
- Qualifying: the mortgage must meet federal insurance rules and stress-test requirements.
What borrowers should check
Ask which insurer is being used and how the premium is calculated, then estimate it with a mortgage insurance calculator. Maximum amortization and property value limits change from time to time, so confirm current figures with the insurer, your lender, or a mortgage default insurance reference rather than relying on older numbers.
Frequently asked questions
Is Canada Guaranty the same as CMHC?
No. CMHC is a federal Crown corporation, while Canada Guaranty is a private company approved to sell mortgage default insurance. Both can insure high-ratio mortgages, and Sagen is a third approved insurer. The coverage works the same way: it protects the lender if a borrower defaults, and the premium is typically passed on to the borrower.
Do I get to choose my mortgage default insurer?
Usually not. The lender decides which approved insurer a mortgage file is submitted to, based on its own arrangements and underwriting guidelines. From a borrower's perspective, the practical difference is the premium charged, which varies by insurer, loan-to-value ratio, and amortization length, plus whether the premium is paid upfront or added to the mortgage balance.
How can I avoid paying default insurance?
Default insurance applies to high-ratio mortgages, which generally means a down payment below 20% of the purchase price. Making a down payment of at least 20% typically results in a conventional mortgage, where default insurance is not required. Confirm current rules and thresholds with your lender before relying on them, since federal requirements can change.
Sources
Related terms
- Mortgage Default Insurance — Insurance that protects the lender, not the borrower, when a high-ratio mortgage goes into default and the home sale does not repay the debt.
- High-Ratio Mortgage — A high-ratio mortgage exceeds 80% of a property's value or purchase price, meaning the down payment is under 20%, and it must be insured against default.
- Canada Mortgage and Housing Corporation (CMHC) — CMHC is the federal Crown corporation that insures Canadian mortgages against borrower default and publishes national housing data and research.
- Sagen — Sagen is a private Canadian mortgage default insurance provider, formerly known as Genworth Canada, that insures high-ratio mortgages alongside CMHC and Canada Guaranty.
- Loan-to-Value Ratio (LTV) — The loan-to-value ratio (LTV) is the size of your mortgage expressed as a percentage of the property's appraised value or purchase price.