According to Canadian mortgage regulations, which of the following is most likely to be required when a borrower's down payment is less than 20% of the property's purchase price?

Question: According to Canadian mortgage regulations, which of the following is most likely to be required when a borrower's down payment is less than 20% of the property's purchase price?

Answer options:

• An open mortgage agreement ✅ Mortgage default insurance
• A second mortgage from a private lender
• A shorter amortization period of 10 years

Correct answer: Mortgage default insurance

Explanation: When a down payment is less than 20% of the home's purchase price, Canadian regulations typically require the borrower to obtain mortgage default insurance (e.g., from CMHC, Sagen, or Canada Guaranty). This protects the lender in case the borrower defaults on the loan.