Quick answer: CMHC mortgage default insurance is mandatory when the down payment is less than 20% of purchase price on properties up to $1.5 million. The premium (0.6%-4.0% of mortgage amount, by LTV tier) is added to the principal and paid over the full amortization.
What this means: Insurance protects the lender, not the borrower — if you default, CMHC pays the lender, but you’re still personally on the hook for any shortfall. The premium is non-refundable and not recoverable when you sell. Properties over $1.5M are not CMHC insurable.
What to do next: Calculate your mortgage with the insurance premium baked in. Affordability calculator →
Mortgage default insurance is mandatory in Canada whenever the down payment is less than 20 percent of the purchase price, on homes priced up to $1.5 million. The premium is calculated as a percentage of the mortgage amount and is typically added to the mortgage and amortized over the life of the loan. The three providers are CMHC (the federal Crown corporation), Sagen, and Canada Guaranty. All three use similar premium schedules. The premium goes to the insurer to cover lender losses if the borrower defaults; it does not cover the borrower.
Premium rates by loan-to-value
| Down payment | Loan-to-value (LTV) | Standard premium | 30-year amortization surcharge |
|---|---|---|---|
| 5% to 9.99% | 90.01% to 95% | 4.00% | +0.20% |
| 10% to 14.99% | 85.01% to 90% | 3.10% | +0.20% |
| 15% to 19.99% | 80.01% to 85% | 2.80% | +0.20% |
| 20% or more | 80% or less | None required | n/a |
Insurance premiums are GST/HST-exempt federally, but provincial sales tax applies in Ontario, Quebec, Manitoba, and Saskatchewan. PST is paid up front at closing, not financed into the mortgage.
Worked example: $700,000 home, 5% down
- Purchase price: $700,000.
- Minimum down payment: $25,000 (5% on first $500,000) + $20,000 (10% on $200,000 between $500K and $700K) = $45,000.
- Mortgage before insurance: $655,000.
- CMHC premium: $655,000 × 4.00% = $26,200.
- Total mortgage with premium financed: $681,200.
- Ontario PST (8% on the premium): $26,200 × 8% = $2,096, paid at closing.
Why borrowers usually accept the premium
| Reason | Detail |
|---|---|
| Faster entry to homeownership | Saving the additional 10-15 percent for 20 percent down can take years; in rising markets the home price grows faster than savings. |
| Lower contract rate | Insured (high-ratio) mortgages typically carry the lowest contract rates because lenders take no default risk. The rate advantage can offset much of the premium. |
| Premium financed | The premium is added to the mortgage, not paid out of pocket. Monthly payment increases modestly, not the cash needed at closing. |
| Switch protection at renewal | An insured mortgage can usually be switched to another lender at renewal without re-qualifying for insurance, preserving competition. |
Insurable but uninsured (insurable status)
Some lenders pay the insurance premium themselves on a borrower’s behalf. The borrower has 20 percent or more down (technically uninsured), but the lender insures the mortgage at the back end to keep its capital costs low. This is called “insurable” or “back-end insured” and offers borrowers the lower insured rate without paying the premium. Common at monoline lenders like First National, MCAP, and CMLS.
When CMHC insurance is not available
- Purchase price over $1.5 million (cap effective Dec 15, 2024).
- Amortization over 30 years.
- Investment properties not occupied by the owner (1-4 unit owner-occupied properties qualify; rental-only do not).
- Down payment from a non-traditional source without lender approval (e.g., unsecured line of credit, certain personal loans).
- Refinances. Insured mortgages cannot be refinanced beyond 80% LTV; the insurance follows the original purchase amount.
Sagen and Canada Guaranty alternatives
Sagen and Canada Guaranty are private insurers offering similar coverage to CMHC. Lenders choose which insurer to use; borrowers cannot directly select. Premium schedules and underwriting are nearly identical. Some lenders rotate insurers based on relationships and pricing.
Premium impact on the monthly payment
| Down payment | Mortgage with premium | Monthly payment at 5.00% / 25-year | Monthly difference vs 20% down |
|---|---|---|---|
| 5% down ($45,000) | $681,200 | $3,964 | +$702 |
| 10% down ($70,000) | $649,530 | $3,780 | +$518 |
| 15% down ($105,000) | $611,660 | $3,560 | +$298 |
| 20% down ($140,000) | $560,000 | $3,262 | baseline |
The premium adds roughly $300 to $700 per month in this example. Over a 25-year amortization, the difference compounds to $90,000 to $210,000 of additional total payments versus 20 percent down, depending on the actual contract rate.
Cross-references
- 5% vs 10% vs 20% Down Payment in Canada
- 30-Year Amortization in Canada
- HBP vs FHSA vs TFSA for Your First Home
Frequently asked questions
- When do I need mortgage default insurance in Canada?
- Whenever the down payment is less than 20 percent of the purchase price, on homes priced up to $1.5 million. Homes priced above $1.5 million cannot be insured.
- What is the CMHC premium at 5 percent down?
- 4.00 percent of the mortgage amount, plus a 0.20 percent surcharge if the amortization is 30 years.
- Is CMHC insurance the same as Sagen and Canada Guaranty?
- Coverage and premium rates are nearly identical across the three providers. Lenders choose which insurer to use; borrowers cannot directly select.
- Can the CMHC premium be paid up front?
- Most borrowers add the premium to the mortgage. It can be paid up front at closing instead, but doing so does not reduce the rate or change the underwriting.
- Is the CMHC premium taxable?
- GST/HST does not apply, but provincial sales tax (8 percent in Ontario, 9.975 percent in Quebec, 7 percent in Manitoba and Saskatchewan) applies on the premium. PST is paid at closing, not financed.
- Does the CMHC premium protect me as the borrower?
- No. The premium covers the lender against borrower default. The borrower remains liable for the mortgage debt.
- Can I avoid CMHC insurance with a co-signer?
- No. The 20 percent down threshold is set by the loan-to-value of the purchase, not by the borrower's identity. A co-signer does not change the LTV.