A self-employed borrower, Sarah Lee, is buying an investment property in Montreal for $1,100,000. She plans to put down a 20% down payment. Her mortgage agent, Ben, is explaining the financing options. What must Ben advise Sarah regarding mortgage default insurance?

Question: A self-employed borrower, Sarah Lee, is buying an investment property in Montreal for $1,100,000. She plans to put down a 20% down payment. Her mortgage agent, Ben, is explaining the financing options. What must Ben advise Sarah regarding mortgage default insurance?

Answer options:

• Sarah's property will be eligible for mortgage default insurance if her income can be verified through audited financial statements. ✅ Mortgage default insurance is not available for an investment property exceeding a purchase price of $1,000,000, regardless of the down payment.
• Sarah's mortgage can be insured if she puts down at least 35% as an investment property purchaser.
• The property's value exceeds the insurable limit for mortgage default insurance, so it will be a conventional mortgage requiring a 35% down payment.

Correct answer: Mortgage default insurance is not available for an investment property exceeding a purchase price of $1,000,000, regardless of the down payment.

Explanation: For mortgage default insurance (CMHC, Sagen, Canada Guaranty), the maximum purchase price or as-if-complete value for owner-occupied or rental properties is $999,999. Properties priced at $1,000,000 or more are not eligible for mortgage default insurance, regardless of the down payment amount or property type.