Sagen and Canada Guaranty: Alternatives to CMHC Mortgage Insurance

Mortgages & Home Buying

Sagen and Canada Guaranty: Alternatives to CMHC Mortgage Insurance

Mar 20, 202621 min read

When most Canadians think of mortgage insurance, they think of CMHC — the Canada Mortgage and Housing Corporation. CMHC is a federal Crown corporation and by far the most recognized name in mortgage default insurance. But CMHC is not the only option. Two private-sector competitors — Sagen (formerly Genworth Canada) and Canada Guaranty — also provide mortgage default insurance in Canada, and they play a much larger role in the market than most buyers realize.

Together, these three insurers cover every insured mortgage in Canada. Understanding how they compare, where they differ, and how your lender chooses between them can help you make more informed decisions about your mortgage — particularly if you have a non-traditional financial profile or are working with challenged credit.

What Is Mortgage Default Insurance?

Mortgage default insurance (often called “CMHC insurance” even when provided by a different insurer) is a type of insurance that protects the mortgage lender — not the borrower — in the event that the borrower defaults on their mortgage payments. Under Canadian federal law, all mortgages with a down payment of less than 20% (known as high-ratio mortgages) must be insured by one of the three approved mortgage insurers.

This insurance is what makes it possible for Canadians to buy homes with as little as 5% down. Without mortgage default insurance, lenders would face significant risk on high-ratio mortgages and would likely require much larger down payments or charge much higher interest rates. By transferring the default risk to the insurer, lenders can offer competitive rates even on smaller down payments.

While the insurance protects the lender, the borrower pays the premium. The premium is calculated as a percentage of the mortgage amount and is almost always added to the mortgage balance, meaning you pay interest on it over the life of the loan. This is an important cost to understand because it increases your total mortgage amount and your monthly payments.

The Three Mortgage Insurers: Profiles and History

CMHC — Canada Mortgage and Housing Corporation

CMHC is a federal Crown corporation established in 1946 to address Canada’s post-war housing shortage. Today, it serves multiple roles: mortgage insurer, housing research organization, affordable housing funder, and housing policy advisor to the federal government. CMHC’s mortgage insurance division is its most visible consumer-facing operation.

As a government-owned entity, CMHC operates with an implicit government backing that gives it unique credibility in the market. CMHC sets many of the standards that the private insurers follow, and federal mortgage rules (such as the stress test, maximum amortization periods, and purchase price limits) apply equally to all three insurers.

CMHC insures both high-ratio mortgages (less than 20% down, where insurance is mandatory) and conventional mortgages (20% or more down, where insurance is optional but lenders sometimes purchase it to reduce their capital requirements). The latter is called “portfolio insurance” or “low-ratio insurance” and is paid for by the lender, not the borrower.

Sagen — Formerly Genworth Canada

Sagen is a private-sector mortgage insurer that has been operating in Canada since 1995, originally as Genworth Financial Mortgage Insurance Company Canada. The company rebranded to Sagen in 2021 following its acquisition by Brookfield Business Partners. Sagen is publicly traded on the Toronto Stock Exchange under the ticker MIC.

Sagen is the largest private mortgage insurer in Canada and has insured over $400 billion in mortgages since its founding. The company operates under the same federal regulations as CMHC and charges the same premium rates. However, as a private company, Sagen has its own underwriting team, approval criteria, and risk assessment models.

One area where Sagen has historically been noted is in its treatment of self-employed borrowers and those with non-traditional income documentation. While all three insurers follow federal rules, Sagen’s underwriters may take a somewhat different view of certain risk factors, potentially approving applications that CMHC might decline. This is not a formal policy difference but rather a reflection of different organizational risk appetites.

Canada Guaranty

Canada Guaranty Mortgage Insurance Company is the smallest of the three insurers but plays an important role in providing market competition. Founded in 2010 (with roots going back to AIG United Guaranty, which operated in Canada before the 2008 financial crisis), Canada Guaranty is backed by the Ontario Teachers’ Pension Plan, one of the largest institutional investors in Canada.

Canada Guaranty has carved out a niche by focusing on strong lender relationships and flexible service. The company is known for responsive underwriting and a willingness to look at applications holistically rather than relying solely on automated decision tools. This approach can benefit borrowers with unusual circumstances, such as those with good income but a past credit blemish, or self-employed applicants with strong businesses but non-traditional documentation.

Premium Rates: How Do They Compare?

All three mortgage insurers charge the same base premium rates, which are set according to federal guidelines. The premium is calculated as a percentage of the mortgage amount (not the purchase price) and varies based on the size of the down payment:

Premium Calculation Example: $500,000 Home with 10% Down

• Purchase price: $500,000
• Down payment: $50,000 (10%)
• Mortgage amount: $450,000
• Insurance premium: $450,000 × 3.10% = $13,950
• Total mortgage (premium added): $463,950

This premium is the same regardless of which insurer your lender selects. The cost difference between the three insurers is zero in terms of the premium itself.

In Ontario, you must pay 8% PST on your mortgage default insurance premium at closing — this applies regardless of which insurer provides the coverage. On a $13,950 premium, the PST is $1,116. In Quebec, the rate is 9.975% QST, resulting in a $1,391.51 charge. Unlike the insurance premium itself, this tax cannot be added to the mortgage and must be paid out of pocket at closing. Other provinces do not charge PST/QST on mortgage insurance premiums.

Approval Criteria: Where the Differences Matter

While the premium rates are identical, the approval criteria and underwriting philosophies of the three insurers can differ in practice. All three operate within the same federal regulatory framework — the same stress test rules, the same maximum amortization periods (25 years for insured mortgages), and the same purchase price limits ($1 million for insured mortgages). However, how they evaluate individual applications within those rules can vary.

Credit Score Requirements

All three insurers require a minimum credit score of 600 for standard approvals, though this is a soft guideline rather than an absolute cutoff. In practice, applications with scores close to 600 may receive additional scrutiny and may need compensating factors such as a larger down payment, lower debt ratios, or strong employment history.

CMHC’s automated underwriting system (called Emili) tends to be more rigid in its scoring criteria. If Emili declines an application, it may be manually reviewed, but the automated decline sets a tone for the evaluation. Sagen and Canada Guaranty may be more willing to look at the complete picture when a score is borderline.

For borrowers with credit scores below 600, none of the three insurers will typically approve the file. In these cases, buyers need to either improve their credit before applying, increase their down payment to 20% or more (eliminating the insurance requirement), or explore B-lender options.

Self-Employed Borrower Programs

Self-employed borrowers often face challenges with mortgage insurance approval because their income documentation does not fit neatly into the standard T4-based verification model. All three insurers have programs for self-employed applicants, but the private insurers (Sagen and Canada Guaranty) are generally viewed as more flexible in this area.

Sagen and Canada Guaranty both offer stated-income or business-for-self programs that allow qualified self-employed borrowers to use alternative income documentation, such as financial statements, business bank account records, contracts, or accountant letters. CMHC also accepts self-employed applications but tends to rely more heavily on CRA income verification (Notice of Assessment and T1 General).

New-to-Canada Programs

All three insurers offer programs for newcomers to Canada who may not have established Canadian credit histories. These programs typically allow recent immigrants and permanent residents to qualify with a minimum down payment (usually 5% to 10%), international credit history, and proof of settlement funds. The specifics of each program vary, and some lenders may have preferred insurer partnerships for new-to-Canada mortgages.

Which Lenders Use Which Insurers?

As a borrower, you do not choose your mortgage insurer — your lender does. Most major Canadian lenders have relationships with all three insurers and will submit applications to the insurer they believe is most likely to approve the file, or the insurer that offers the best terms for their portfolio needs.

A good mortgage broker will know which insurer is most likely to approve your specific application and will guide your lender accordingly. If your application is declined by one insurer, your broker can ask the lender to submit it to a different insurer. This is one of the advantages of working with a broker rather than going directly to a single bank.

If you have a complex file — self-employment income, past credit issues, non-traditional income sources, or a thin credit file — ask your mortgage broker which insurer they plan to submit to and why. An experienced broker will have a strategy based on their knowledge of each insurer’s underwriting tendencies. This can save you time and improve your chances of approval.

Step-by-Step: How Mortgage Insurance Approval Works

1. You Apply for a Mortgage

   You submit a mortgage application to a lender (directly or through a broker). You provide documentation including income verification, employment details, identification, and consent for a credit check. If your down payment is less than 20%, the lender knows the mortgage must be insured.



2. Lender Submits to Insurer

   Your lender packages your application and submits it to one of the three mortgage insurers. The lender selects the insurer based on their business relationship, the nature of your application, and their assessment of which insurer is most likely to approve. Most lenders have digital submission systems that connect directly to the insurers’ underwriting platforms.



3. Insurer Underwrites the Application

   The insurer reviews your application, credit report, income documentation, property details, and appraisal (if required). The review may be automated (using systems like CMHC’s Emili), manual, or a combination. The insurer evaluates the risk of default based on your credit, income stability, debt ratios, and the property’s value and marketability.



4. Insurer Issues Decision

   The insurer either approves the application (with or without conditions), declines it, or requests additional information. If approved, the insurer issues a certificate of insurance. If declined, your lender or broker may submit to a different insurer or explore alternative options.



5. Premium Is Calculated and Added to Mortgage

   Once approved, the insurance premium is calculated based on your mortgage amount and down payment percentage. The premium is almost always added to your mortgage balance, increasing your total borrowing. In Ontario and Quebec, PST/QST on the premium must be paid at closing out of pocket.

Switching Insurers: Is It Possible?

Once your mortgage is insured, you cannot switch insurers on that mortgage during its current term. The insurance certificate is linked to the specific mortgage and lender. However, there are situations where the insurer may effectively change:

At renewal: If you switch lenders at renewal (for example, moving from TD to a credit union for a better rate), the new lender may need to re-insure the mortgage with a different insurer, or the existing insurance may be transferred (ported) to the new lender. The specific process depends on the lenders and insurers involved.

When refinancing: If you refinance your mortgage (change the amount, amortization, or other terms beyond a standard renewal), the existing insurance is void and new insurance may be required if the mortgage remains high-ratio. The new lender may use a different insurer.

Portability: Mortgage insurance is generally portable, meaning if you sell your home and buy a new one, the existing insurance can sometimes be transferred to the new mortgage, subject to the insurer’s approval of the new property and any changes to the mortgage amount.

Mortgage Insurance and Bad Credit

If you have bad credit (generally defined as a credit score below 650 for mortgage purposes), obtaining mortgage default insurance can be challenging. All three insurers have minimum credit score requirements around 600, and in practice, applications with scores below 620-640 face higher scrutiny.

However, there are important nuances:

Compensating factors matter. If your credit score is 600-620 but you have a larger down payment (10-15%), stable employment, low debt ratios, and a strong explanation for past credit issues, an insurer — particularly Sagen or Canada Guaranty — may still approve your application.

Recent credit improvement counts. If your score was 520 two years ago but is now 620 because you have been rebuilding your credit consistently, underwriters may view this positively. A trend of improvement demonstrates financial responsibility.

Below 600 means alternatives. If your credit score is below 600, mortgage default insurance is generally not available, and you will need to pursue uninsured mortgage options. This means either saving a 20% down payment to avoid the insurance requirement, or working with a B-lender or private lender that does not require insurance. These options come with higher interest rates and additional costs.

The Future of Mortgage Insurance in Canada

The mortgage insurance landscape in Canada continues to evolve. Several trends are worth watching:

Regulatory changes: The federal government periodically adjusts mortgage rules that affect all three insurers equally. Recent changes have included stress test modifications, amortization period adjustments for first-time buyers of new builds, and purchase price limit reviews. Any future changes will apply to CMHC, Sagen, and Canada Guaranty equally.

Market share competition: Sagen and Canada Guaranty have been gradually growing their market share relative to CMHC. This competition benefits consumers by ensuring that there are multiple avenues for approval and that no single insurer dominates the market entirely.

Technology and automation: All three insurers are investing in technology to speed up underwriting and improve the borrower experience. Automated underwriting systems can provide instant approvals for straightforward applications, reducing the time between mortgage application and conditional approval.

Housing affordability focus: As housing affordability remains a top concern for Canadians, all three insurers are under pressure to support programs that help first-time buyers and other underserved groups access homeownership. This includes new-to-Canada programs, self-employed borrower solutions, and potential innovations in alternative credit assessment.

Frequently Asked Questions About Mortgage Insurance in Canada

Final Thoughts

While CMHC dominates the public conversation about mortgage insurance in Canada, Sagen and Canada Guaranty are equally legitimate and important players in the market. Understanding that you have three potential avenues for insurance approval — and that each may view your application somewhat differently — gives you and your mortgage broker valuable strategic options.

For borrowers with straightforward files (good credit, stable employment income, standard documentation), the choice of insurer will make little practical difference. But for those with self-employment income, past credit challenges, non-traditional documentation, or other complexities, the flexibility of the private insurers can sometimes make the difference between approval and decline.

Work with an experienced mortgage broker who understands the nuances of all three insurers, ask questions about the insurer strategy for your specific file, and know that a decline from one insurer does not necessarily mean a decline from all three. The Canadian mortgage insurance market is designed to provide options — make sure you explore all of them.

Understanding Portfolio Insurance and Low-Ratio Insurance

Beyond the standard high-ratio mortgage insurance that most consumers encounter, there is another category of mortgage insurance that operates largely behind the scenes: portfolio insurance and low-ratio insurance.

What Is Portfolio Insurance?

Portfolio insurance (also called bulk insurance or low-ratio insurance) is purchased by lenders to insure mortgages where the borrower has put down 20% or more. In these cases, insurance is not required by law, but many lenders choose to insure these mortgages anyway for their own financial benefit. The key differences from standard high-ratio insurance are significant:

• The lender pays the premium, not the borrower — you do not see this cost.
• The insurance allows the lender to securitize the mortgage (sell it to investors), which frees up capital for more lending.
• The insurance reduces the lender’s capital requirements under banking regulations.

Portfolio insurance is why some lenders can offer competitive rates even on conventional (20%+ down) mortgages. By insuring these mortgages, lenders reduce their risk and their capital costs, and they can pass some of those savings on to borrowers through lower rates.

How Portfolio Insurance Affects You

As a borrower, you generally will not know or need to care whether your conventional mortgage has portfolio insurance. You do not pay the premium, and the insurance does not affect your mortgage terms or rates directly. However, it does affect the broader mortgage market by enabling lenders to offer more competitive rates and by increasing the overall capacity for mortgage lending in Canada.

One situation where portfolio insurance becomes relevant is at renewal. If your mortgage has portfolio insurance and you want to switch lenders, the new lender may need to re-insure the mortgage through one of the three insurers. This process is usually seamless but can occasionally create complications, particularly for non-standard properties or borrowers whose financial situations have changed.

Mortgage Insurance Premium Refunds

In certain circumstances, you may be entitled to a partial refund of your mortgage insurance premium. This typically applies when you sell your home and purchase a new one within a specific timeframe, or when you port your mortgage to a new property.

CMHC Premium Refund Policy

CMHC offers a premium refund when an insured borrower sells their property and purchases a new one, provided the new mortgage is also insured by CMHC. The refund amount depends on the time elapsed since the original insurance certificate was issued. The refund decreases over time and is generally only available within the first few years of the mortgage.

Sagen and Canada Guaranty Refund Policies

Both Sagen and Canada Guaranty have similar refund policies. The specific terms and timeframes may vary slightly, so check with your lender or broker for the details applicable to your insurance certificate. In general, all three insurers are willing to refund a portion of the premium when the borrower moves and takes out a new insured mortgage within a reasonable timeframe.

Comparing the Claims Process

While the claims process is something that borrowers hope never to encounter (since it means defaulting on your mortgage), understanding how it works provides insight into the role of mortgage insurers in the Canadian housing system.

When a borrower defaults on an insured mortgage, the lender first attempts to work with the borrower on solutions such as payment deferrals, loan modifications, or voluntary sale. If these efforts fail and the lender proceeds with foreclosure or power of sale, the insurer covers the lender’s losses — the difference between what is owed on the mortgage and what the property sells for, plus associated costs.

All three insurers have similar claims processes, as they are all regulated under the same federal framework. The key difference is that CMHC, as a Crown corporation, has the full backing of the Canadian government, meaning its ability to pay claims is essentially unlimited. Sagen and Canada Guaranty, as private companies, maintain their own capital reserves and are subject to OSFI (Office of the Superintendent of Financial Institutions) capital adequacy requirements. In practice, both private insurers are well-capitalized and have successfully paid claims through multiple economic cycles, including the 2008-2009 financial crisis and the 2020 pandemic-related disruption.

Impact of Recent Regulatory Changes on All Three Insurers

The federal government regularly updates mortgage regulations that affect all three insurers equally. Understanding recent changes helps you contextualize the current mortgage insurance landscape:

Stress test requirements: Since 2018, all insured mortgages in Canada are subject to a stress test that requires borrowers to qualify at the higher of their contract rate plus 2%, or the Bank of Canada’s qualifying rate (currently 5.25%). This test applies regardless of which insurer is used and has significantly impacted how much Canadians can borrow.

Extended amortization for first-time buyers: Recent federal policy changes have explored allowing 30-year amortizations for first-time buyers purchasing newly built homes, rather than the standard 25-year maximum for insured mortgages. All three insurers would implement this change equally if fully enacted.

Purchase price limit: The maximum purchase price for an insured mortgage remains $1 million. Properties above this threshold require a minimum 20% down payment and cannot be insured by any of the three insurers. This limit has been criticized for not keeping pace with housing prices in markets like Toronto and Vancouver, where the average home price can exceed $1 million.

Environmental considerations: All three insurers have been incorporating environmental risk factors into their underwriting, including flood risk mapping and climate-related property risks. CMHC has been particularly active in promoting energy-efficient housing through programs like the CMHC Green Home program, which offers a premium refund for energy-efficient homes.

It bears repeating: mortgage default insurance protects the lender, not you. If you default on your mortgage, the insurer pays the lender, but the insurer can then pursue you for the shortfall. You remain personally liable for any deficiency (the difference between what you owed and what the property sold for) in most provinces. Mortgage default insurance does not protect you from the financial consequences of default — only from being unable to get a mortgage in the first place.