1) Is the Province of Nova Scotia providing traditional mortgage default insurance, and is there any cost added to the borrower’s mortgage?
The Province of Nova Scotia is not offering traditional mortgage default insurance. Instead, it provides a credit-risk guarantee to participating credit unions.
There is no premium charged to the borrower, and nothing is added to the mortgage balance. Borrowers do not pay any fee for this protection.
It is important to clarify that this program is not mortgage insurance through CMHC, Sagen, or Canada Guaranty. Rather, it is a provincial deficiency guarantee.
How the program works:
- The Province guarantees up to 90% of any deficiency if a borrower defaults and the sale of the property does not fully cover the outstanding loan.
- A deficiency is calculated as:
Remaining principal + accrued interest – proceeds from property sale - There is no cost to the credit union.
- There is no insurance premium charged to the borrower.
- Borrowers with less than 20% down are not required to purchase separate default insurance.
2) Are mortgages under this program offered at the best available rates, or are they based on posted rates? Is the rate capped at Prime + 2%?
The program sets a maximum interest rate of Prime + 2%. However, participating credit unions maintain full authority to price mortgages according to their normal lending practices, provided the final rate does not exceed that cap.
There is no automatic guarantee that borrowers will receive the lowest market rate. Pricing remains at the discretion of each participating credit union.
3) How does the stress test apply? If the interest rate is capped at Prime + 2%, would the qualifying rate be Prime + 4%?
Borrowers must qualify under the standard federal mortgage stress test requirements.
This means applicants must demonstrate affordability at the higher of:
- The benchmark qualifying rate, or
- The contract rate plus 2%.
In practice, if a borrower receives a mortgage at the maximum permitted rate of Prime + 2%, the qualifying rate would typically be Prime + 4%, unless the benchmark qualifying rate is higher at the time of application.
4) Is a 30-year amortization permitted?
No. At present, the program allows a maximum amortization of 25 years.
5) Are mobile homes located on owned land eligible? Is there an age restriction?
The program does not specifically exclude mobile homes situated on land owned by the borrower.
Eligibility generally follows the standard residential lending policies of each participating credit union. If a mobile home would normally be accepted as security under the credit union’s guidelines, it may qualify under this program.
There is currently no provincially mandated age restriction noted in the program documentation. However, age limitations or additional conditions may apply according to the individual credit union’s underwriting policies.
Although the program allows amortization up to 25 years, the age of the mobile home could reduce the maximum amortization available.
6) Can you provide a practical example of how the program works?
Example Scenario:
- Purchase Price: $400,000
- Down Payment (2%): $8,000
- Mortgage Amount: $392,000
- Default Insurance Premium: $0
- Total Mortgage: $392,000
Because there is no default insurance premium under this program, the mortgage balance remains $392,000. The provincial deficiency guarantee replaces the need for borrower-paid insurance.
Mortgage payments are calculated in the standard way, based on the approved interest rate and amortization period.
For example, at an interest rate of 6.45%:
- Over 30 years (for comparison only): $2,443.01 monthly P&I
- Over 25 years (program maximum): $2,613.84 monthly P&I
Although some illustrations may reference 30-year amortization for comparison purposes, the program currently limits amortization to 25 years, and payment calculations must reflect that maximum.
