It is worth stating plainly, because it surprises many first-time buyers paying the premium: default mortgage insurance protects the lender, not the borrower. If an insured borrower defaults, the insurer pays the lender's loss, and the insurer then has the right to pursue the defaulted borrower for that amount. The borrower's insurance premium does not forgive their debt, protect their credit, or insure their equity — it exists to make the lender whole, which is precisely why lenders are willing to offer their best rates on insured files. This distinction is worth explaining to a client who assumes the premium they are paying is somehow for their own protection.
Canada has one public and two private mortgage default insurers: CMHC, a Crown corporation, and Sagen and Canada Guaranty, both private companies. All three operate under the same federal regulatory framework governing which mortgages are eligible for insurance and on what terms — the price cap, down payment tiers and amortization rules covered elsewhere in this course apply across all three insurers, not just to CMHC. Where the three genuinely differ is in their individual underwriting programs and risk appetite for specific borrower profiles, such as the self-employed alternative-income programs each insurer publishes under its own name and terms.
The insured, insurable or uninsurable classification is decided at the point a specific mortgage application is underwritten — it is a property of the transaction, not a permanent trait attached to a borrower or a property. The same client who bought their first home as an insured purchase at 10% down can, a few years later, refinance that same property, and the refinance is uninsurable regardless of how much equity has built up in the meantime, because refinances are categorically excluded from insurability. Likewise, a property that was insurable on one sale, at one borrower's down payment level, could be purchased insured by the next buyer at a lower down payment. Category attaches to the deal in front of you, not to the file's history.
Everything covered so far in this course concerns transactional insurance — insurance tied to and priced on an individual mortgage at the point of origination. There is a separate mechanism worth knowing exists: lenders can also purchase bulk or portfolio insurance from CMHC, Sagen or Canada Guaranty on a pool of mortgages that already have 20% or more equity — loans that did not need insurance for the borrower to qualify. Lenders do this for their own funding and balance-sheet purposes, often to support securitizing those loans, and it happens entirely behind the scenes from the borrower's perspective; the borrower on such a loan never sees a premium and is not part of that decision.
This is not the same as the insurable category covered in the next module, where a lender insures an individual file on the back end at closing. Bulk insurance is a portfolio-level, after-the-fact lender funding tool. It is included here only so that a broker who hears the term does not confuse it with anything the borrower needs to act on.
A borrower bought their home as an insured purchase five years ago at 10% down and has since built substantial equity. They now want to refinance to consolidate debt. What insurance category applies to the refinance?
Insurance category attaches to each transaction, not to the property's history or the borrower's accumulated equity — a refinance is uninsurable by definition, full stop, regardless of how much equity has built up or how the original purchase was categorized. Believing the original insured status carries forward, or that sufficient equity alone makes a refinance insurable, is exactly the kind of mistake this module exists to prevent. The original insurer is irrelevant to how the refinance itself is categorized.
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