A buyer is purchasing their first home with a purchase price of $550,000 and has a 10% down payment. Assuming the property is in a major urban center, which of the following statements regarding mortgage default insurance is true?

Question: A buyer is purchasing their first home with a purchase price of $550,000 and has a 10% down payment. Assuming the property is in a major urban center, which of the following statements regarding mortgage default insurance is true?

Answer options: ✅ The mortgage loan is insurable by CMHC, Sagen, or Canada Guaranty as it meets the minimum down payment requirement for high-ratio mortgages.

• The mortgage loan is not insurable because the purchase price exceeds the maximum insurable amount for high-ratio mortgages.
• The buyer will be required to obtain mortgage default insurance from CMHC, as private insurers do not cover first-time homebuyers with a 10% down payment.
• Mortgage default insurance is not required in this scenario if the buyer can provide a co-signer with excellent credit.

Correct answer: The mortgage loan is insurable by CMHC, Sagen, or Canada Guaranty as it meets the minimum down payment requirement for high-ratio mortgages.

Explanation: Mortgage default insurance is mandatory for mortgages with a loan-to-value ratio greater than 80% (i.e., less than a 20% down payment). The maximum insurable amount for a high-ratio mortgage is currently $1,000,000, and a 10% down payment ($55,000) for a $550,000 home results in a 90% LTV, making it eligible for insurance from CMHC, Sagen, or Canada Guaranty.