Financial institutions in Canada are only allowed to loan up to 80% of the value of a residential property.    Any mortgages exceeding the 80% requirement are consider “high ratio” and require a purchaser  to buy mortgage default insurance available through CMHC and Genworth Finanacial. Mortgage loan insurance helps protects lenders against mortgage default, and enables consumers to purchase homes with little or no downpayment — with interest rates comparable to those with a 20% downpayment.

The insurance premium can be up to 3.70% of the mortgage loan and is usually added to the mortgage amount being borrowed.  On closing financial institution will deduct the amount required to pay the default insurance directly from your mortgage advance unless your are paying the premium up front from your own resources.

Requirements:

a down payment of at least 5% of the purchase price

must purchase a home in Canada

must be occupied as principal residence

 FOR FURTHER INFORMATION:

http://www.cmhc-schl.gc.ca/en/
http://www.genworth.ca