Known mostly as CMHC insurance, possessing mortgage default insurance is the law in Canada for 5%-19.99% down payments. CMHC shields lenders from borrowers who stop paying or default on their mortgage loan.
Homebuyers will be charged for 2.8%-4% of their total mortgage for mortgage default insurance, but it lets those unable to purchase a home otherwise the chance to have their own home. It prevents mortgage rates from being completely unaffordable because the risk of default would be too great. Because of mortgage default insurance, lenders can provide lower rates, since the default risk is passed along to mortgage insurers.