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Applying for a mortgage?

Here's what you need to know about Mortgage Default Insurance

This document will give you information about mortgage default insurance: what it is, when it is needed, how it is calculated, and other important details that affect homeowners.

What is mortgage default insurance?
Mortgage default insurance helps protect TD should a borrower default on a residential mortgage loan agreement or the collateral charge agreement (we'll call these two agreements the mortgage). A mortgage loan is generally considered to be in default if a payment is not made on the scheduled due date, but there are other situations when a mortgage loan may be in default. If a property is sold as the result of a mortgage loan default but the sale does not generate enough money to pay the outstanding balance and all associated costs, fees and interest, the insurer will pay the shortfall to TD and will then have the right to enforce against each borrower personally for the deficiency.

When is mortgage default insurance required?
At TD, by law, we cannot lend borrowers more than 80% of the value of their property unless the mortgage is insured against default. The borrower pays for this insurance (and any applicable sales tax).

Mortgage default insurance allows us to lend to qualified borrowers to purchase homes with a down payment of as little as 5%. If the home is worth more than $500,000, a bigger down payment may be required. In addition, TD may require mortgage default insurance in certain situations.

When you are approved for a mortgage loan that requires mortgage default insurance, you have the choice of either paying the default insurance premium amount up front or adding it to the principal amount of your mortgage loan.

Your TD mortgage loan agreement will show the amount of the mortgage default insurance premium for your mortgage loan. All the premium rates are below, but the company providing the insurance may amend the calculations for the premium rates at any time. In that case, because of timing, this document may not reflect the most current percentages. However, your mortgage loan agreement will always reflect the correct premium amount. Depending on your province of residence, you may be charged a provincial sales tax on the premium amount.

How is the insurance premium amount calculated and charged?
TD is required to provide specific information about mortgage loan applications to the companies that provide mortgage default insurance. This information is used by the mortgage insurer to calculate the premium amount that is charged to the borrower. This information includes:

  • stated property value
  • loan amount
  • loan to value (LTV) ratio
  • amortization period
  • employment status
  • source of down payment

The company providing the insurance will calculate the premium amount and inform us of the amount. We then pass on that charge to the borrower. In all cases, the default insurance premium amount charged to TD by the insurer, plus any applicable sales tax, is the amount charged to the borrower.

TD does not receive any benefits or payments from the mortgage default insurer and we do not have any arrangements with them that require disclosure to borrowers.

Here is how your insurance premium is calculated

Mortgage loan information passed on to the insurer What it means
Stated Property Value Lesser of purchase price or property value
Loan Amount Amount you want to borrow:
This is the Principal Amount minus the insurance premium (if financed)
Loan to Value (LTV) ratio Ratio of loan amount to stated property value
If the stated property value is greater than $500,000, then the maximum LTV ratio is as follows:
(a) 95% for the amount up to $500,000 and
(b) 90% for the amount over $500,000.
Amortization Period Time required to pay off the mortgage, assuming the same interest rate and payment schedule throughout the entire life of the mortgage loan
Employment Status Employed or self-employed with third party income validation, or self-employed without third party income validation

Default insurance premium rates effective for mortgages approved on or after March 17th, 2017 :

LTV ratio Up to a maximum 25-year amortization period
Owner-occupied properties Rental Properties(2-4 units)** Cottage Properties**
Percentage charged on Mortgage Loan Amount for employed/self-employed borrower with third party income validation Percentage charged on Mortgage Loan Amount for self-employed borrower without third party income validation** Percentage charged on Mortgage Loan Amount for employed/self-employed borrower with third party income validation Percentage charged on Mortgage Loan Amount for employed/self-employed borrower with third party income validation
Up to 65% 0.60% 1.50% 1.45% 1.45%
65.01% - 75% 1.70% 2.60% 2.00% 2.55%
75.01% - 80% 2.40% 3.30% 2.90% 3.15%
80.01% - 85% 2.80% 3.75% Not available 3.50%
85.01% - 90% 3.10% 5.85% Not available 4.35%
90.01% - 95% 4.00% Not available Not available Not available
90.01% - 95% and non-traditional source of down payment 4.50% Not available Not available Not available
*Single rental units are not eligible for insurance.

**These percentages apply to purchases of cottage properties that may not be accessible year round, or are accessible year-round but do not meet insurer's standard property criteria. Some cottage properties may qualify for owner- occupied property rates.

If the principal amount of your mortgage is a result of combining an existing insured mortgage with additional borrowed funds, the insurance company will combine the information from the existing mortgage and use the premium table below to calculate the premium amount. The insurer may determine that a premium credit is available.

Here are the default insurance premium rates for new mortgages approved on or after March 17, 2017, where:

  • there is an increase on the borrowed amount, and
  • the original loan amount required mortgage default insurance

This rate is charged on the additional borrowed funds.

LTV ratio 25-year amortization period*
Owner-occupied properties Rental Properties(2-4 units)** Cottage Properties***
Percentage charged on increase to Loan Amount for employed/self-employed borrower with third party income validation Percentage charged on increase to Loan Amount for self-employed borrower without third party income validation Percentage charged on increase to Loan Amount for employed/self-employed borrower with third party income validation Percentage charged on increase to Loan Amount for employed/self-employed borrower with third party income validation
Up to 65% 0.60% 3.00% 3.15% 2.90%
65.01% - 75% 5.90% 6.50% 3.45% 6.10%
75.01% - 80% 6.05% 7.00% 4.30% 6.40%
80.01% - 85% 6.20% 7.50% Not available 7.00%
85.01% - 90% 6.25% 9.00% Not available 7.60%
90.01% - 95% 6.30% Not available Not available Not available
90.01% - 95 % and non-traditional source of down payment 6.60% Not available Not available Not available
* If the combined amortization period extends beyond the remaining original amortization period, the insurer may add a 0.6% premium surcharge on the above percentages.

** Single rental units are not eligible for insurance. These percentages apply to purchase of cottage properties that may not be accessible year round, or are accessible year-round but do not meet insurer's standard property criteria.

*** These percentages apply to purchase of cottage properties that may not be accessible year round, or are accessible year-round but do not meet the insurer's standard property criteria. Some cottage properties may qualify for owner-occupied property rates.