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Portfolio insurance (also called bulk insurance) is default insurance a lender purchases on a pool of otherwise-conventional, low-ratio mortgages after closing — typically to make those loans eligible for cheaper securitized funding — rather than insurance the borrower requests or pays for directly.
Portfolio insurance is only possible on mortgages that qualify as insurable even though the loan-to-value is under 80% and doesn’t require the borrower to carry mortgage default insurance. The lender pays the premium, generally to make the mortgage eligible for cheaper funding sources such as securitization, not to protect against the borrower’s default risk in the way high-ratio insurance does.
Because it’s optional and lender-driven, portfolio insurance doesn’t change what the borrower sees on their mortgage documents or what qualifying rules apply — the file still needs to meet the insurable criteria (price cap, amortization limits) even though the borrower already has 20% or more equity.
Lender-purchased, not borrower-mandated: unlike default insurance on high-ratio loans, portfolio insurance is optional and paid for by the lender, not the borrower.
Same eligibility ceiling applies: only mortgages that meet insurable criteria — price cap and amortization limits — can be bulk-insured.
Funding-cost driver: lenders use portfolio insurance mainly to access cheaper securitized funding, such as mortgage-backed securities programs.
Doesn’t change borrower qualifying rules: GDS/TDS and the minimum qualifying rate still apply to the file the same way they would without portfolio insurance.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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