What is mortgage insurance and when is it
required?
“Do buyers need mortgage insurance to buy your Georgetown home — and why that changes the game for sellers?”
Quick answer (read this first)
Mortgage insurance — called mortgage default insurance in Canada — is required when a buyer puts less than 20% down on an owner-occupied home. It protects the lender, not the seller. For Georgetown sellers, that means many buyers will need this insurance to qualify. That affects who can make a clean, unconditional offer, how fast a sale closes, and how you should price and negotiate your home.
What mortgage insurance is — plain and simple
Mortgage default insurance (CMHC, Sagen/Genworth, Canada Guaranty) is a mandatory insurance policy for high-ratio mortgages in Canada. “High-ratio” means the buyer’s down payment is under 20% of the purchase price. The lender requires it to reduce their risk if the borrower defaults.
Key points:
- It protects the lender — not the homeowner or seller.
- It allows buyers with smaller down payments to buy a home.
- The borrower pays the premium. The premium can be added to the mortgage or paid upfront.
Don’t confuse this with mortgage life or disability insurance. Those optional products protect the borrower’s mortgage payments in case of death or disability.
When mortgage insurance is required
Mortgage insurance is required for most standard residential purchases when the buyer’s down payment is below 20%. That applies to:
- Single-family homes
- Townhouses
- Most condos (subject to lender/property rules)
Exceptions include:
- Purchases with 20%+ down (conventional mortgages)
- Some investment properties (different rules)
- Certain commercial or non-standard properties
In short: if your buyer can’t put down at least 20%, they’ll almost certainly need mortgage default insurance.
How mortgage insurance affects buyer qualification — and your sale
Mortgage insurance makes mortgage approval possible for many buyers. But it also changes underwriting. Lenders will look closely at:
- Income and debt ratios
- Credit score and credit history
- Appraised value vs offer price
- Property type and resaleability
Why that matters for sellers:
- More buyers are eligible — expanding your pool.
- But some buyers who could have afforded 20% down might now use smaller down payments, making them more rate-sensitive.
- Bank underwriters may require additional documentation or appraisals, which can slow conditional financing timelines.
Local market context — Georgetown, Ontario (what sellers need to know)
Georgetown sits inside Halton Hills and is part of the Greater Toronto Area market. Key trends affecting sellers in 2024:
- Demand remains solid from commuters and families leaving central GTA for value.
- Inventory often tight for well-priced homes, especially detached and family-friendly properties.
- Mortgage rates stayed higher than the multi-year lows seen earlier in the decade, reducing purchasing power for buyers and making down payments more critical.
- Buyers with smaller down payments rely heavily on mortgage default insurance to qualify.
What this means: sellers get more buyers in the door because mortgage insurance expands buyer pools — but those buyers may be more vulnerable to rate changes and stricter underwriting. You must vet offers and know which ones have a high probability of closing.
Practical seller tactics — protect the sale and get top dollar
- Insist on proof of pre-approval, not pre-qualification
- Pre-approval from a lender shows a deeper level of underwriting. It often indicates the lender has done initial checks and that mortgage insurance is feasible for that buyer.
- Ask for lender contact or mortgage broker details on offers
- This lets you and your lawyer confirm timelines and potential red flags early.
- Prefer offers with fewer financing conditions or shorter financing conditions
- If a buyer needs mortgage insurance, expect underwriting steps. Negotiate timelines that protect your closing date.
- Price for the market, not for the top buyer
- Mortgage-insured buyers expand demand. A well-priced home often triggers competing offers. That’s better than pricing high and waiting for a single buyer with 20% down.
- Consider offers with conventional financing if you value low risk
- Conventional offers (20%+ down) avoid mortgage default insurance and usually close faster. If you can wait for the better offer, do it.
- Choose experienced professionals
- Work with a realtor who understands insured mortgages and local lender practices. Local mortgage brokers speed up approvals and troubleshoot appraisal or insurance issues.
Negotiation levers you can use
- Ask for a shorter finance condition (if feasible), or a deposit increase to show buyer commitment.
- Prefer firm closing dates and limit extension rights.
- If appraisal risk is high, ask for appraisal gap language or proof of additional funds to cover gap.
These items reduce the chance of a buyer walking away when underwriting finds issues.
Special cases sellers face in Georgetown
- Condos: Some condo projects or older buildings have additional insurance or lending restrictions. Confirm condo status with a lender early.
- New listings priced near lending cliffs: If price pushes buyers into requiring higher loan amounts, more buyers will need mortgage insurance. Know that when setting list price.
- Multiple offers: A mix of insured and conventional offers is common. Understand trade-offs: speed and certainty vs. price.
For sellers carrying a mortgage: does mortgage insurance matter?
If you still have a mortgage on the property, your lender’s insurance status doesn’t change because of the sale. Mortgage default insurance is about the buyer’s financing. However, understand your current mortgage terms:
- Prepayment penalties can affect timing of sale proceeds.
- If you plan to buy another home, your new financing will have its own rules — and you may need mortgage insurance on your new purchase if down payment is <20%.
Work with a mortgage professional to align sale timing with your next purchase financing.
How to vet offers mentioning mortgage insurance
Order of priority when assessing offers:
- Clean, unconditional cash offers (highest certainty)
- Conventional financing (20%+ down) offers
- Mortgage-insured offers with strong pre-approval and short finance conditions
Verify pre-approval details: lender name, mortgage program, whether the lender is satisfied with property type and appraisal requirements. Your realtor can request the mortgage broker or lender sign off on timelines.
Closing faster — checklist for sellers
- Require lender/broker contact on offer
- Set clear finance-condition deadlines and consequences
- Get appraisal risk assessed early (age, condo status, recent comps)
- Request acceptable deposit amounts and firm closing date
- Have closing funds and title documents organized
Follow these steps and you’ll reduce finance-related fall-throughs.
Final word — convert mortgage insurance into a selling advantage
Mortgage insurance expands buyer pools. Use it. Price right. Vet offers. Push for short, enforceable finance timelines. The goal: attract multiple credible buyers so competition sets your price.
If you want a simple, aggressive plan for selling in Georgetown that factors in insured mortgages, local lending quirks, and timing — contact a local expert who moves fast.
Contact for a free seller strategy session:
- Tony Sousa, Local Realtor — tony@sousasells.ca • 416-477-2620
- Website: https://www.sousasells.ca
FAQ — top questions sellers in Georgetown ask about mortgage insurance
1) Will mortgage insurance make buyers weaker or stronger?
It depends. Insurance lets more buyers qualify, which increases demand. But insured buyers may face tighter underwriting and more condition steps. Strong pre-approval and a local lender smooth the process.
2) How much does mortgage insurance cost buyers?
Premiums vary by loan-to-value and insurer. The buyer usually pays the premium, either upfront or added to the mortgage. Ask your buyer’s broker for the exact rate — it can affect affordability and offer strength.
3) Can I refuse offers that require mortgage insurance?
You can accept any legally valid offer. But refusing all insured offers can cut off a large segment of buyers in today’s market. Evaluate each offer on strength, not just whether it’s insured.
4) What if the appraisal comes in low?
Low appraisals reduce the amount lenders will insure. Buyers must cover the gap with more down payment or renegotiate price. Protect yourself by requiring appraisal gap language or higher deposit.
5) Are condos riskier when it comes to mortgage insurance?
Some condos have lending restrictions (e.g., low reserve funds, high investor units, recent special assessments). Lenders and insurers review condo documents. Screen buyers early and clarify any condo lending flags.
6) How long does financing approval take for insured mortgages?
It varies. Pre-approval shortens the process. Expect more document checks and possibly a longer finance-condition period than a conventional mortgage.
7) Should I push for a conventional buyer (20%+ down)?
If you need certainty and a fast close, yes. But if pricing competitively will create multiple offers including insured buyers, the resulting competition can push your sale price higher.
8) How can my realtor help with mortgage insurance issues?
A skilled realtor screens buyers’ financing, contacts mortgage brokers, negotiates finance timelines, and structures offers to minimize risk and maximize price. That expertise matters in Georgetown’s competitive corridors.
Need a tailored selling plan that uses mortgage insurance dynamics to your advantage in Georgetown? Email Tony Sousa at tony@sousasells.ca or call 416-477-2620. He’ll give you a straightforward, tactical plan to get the best price and the strongest buyer.
