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If you buy a home in Canada with less than a 20% down payment, you'll almost certainly pay for mortgage default insurance — commonly called CMHC insurance after the Canada Mortgage and Housing Corporation, though Sagen and Canada Guaranty offer it too. It protects the lender if you default, not you, yet you're the one who pays the premium. Here's exactly how it works and what it costs.
When mortgage insurance is mandatory
Default insurance is required on any "high-ratio" mortgage — one where your down payment is below 20% of the purchase price. Put down 20% or more and your mortgage is "conventional" and needs no insurance. There's also a price ceiling: as of December 2024, the maximum home price eligible for an insured mortgage rose to $1.5 million (up from $1 million). Above that, you generally need at least 20% down because the loan can't be insured.
Minimum down payment rules
Canada's minimum down payment is tiered by price:
- 5% on the portion of the price up to $500,000.
- 10% on the portion between $500,000 and $1.5 million.
- 20% if the price is $1.5 million or more (no insurance available).
So on a $700,000 home, the minimum down payment is 5% of $500,000 plus 10% of $200,000 — that's $25,000 + $20,000 = $45,000, or about 6.4% overall.
How the premium is calculated
The premium is a percentage of your mortgage amount (the price minus your down payment), and the percentage rises as your down payment shrinks — because a smaller down payment is riskier for the lender. Standard CMHC premium rates are:
| Down payment | Premium (% of loan) |
|---|---|
| 5% – 9.99% | 4.00% |
| 10% – 14.99% | 3.10% |
| 15% – 19.99% | 2.80% |
| 20% or more | No premium |
Example: on that $700,000 home with $45,000 down, the mortgage is $655,000 and the down payment is about 6.4%, so the premium is 4.00% × $655,000 = $26,200. That premium is usually added to your mortgage balance and paid off over the amortization, so you pay interest on it too.
The provincial sales tax catch
In Ontario, Quebec, Saskatchewan, and Manitoba, provincial sales tax applies to the insurance premium. Unlike the premium itself, that tax cannot be added to your mortgage — you must pay it in cash at closing. On a $26,200 premium in Ontario (8% PST), that's an extra ~$2,096 due up front, which many first-time buyers overlook.
How to reduce or avoid it
- Reach 20% down. The cleanest way to avoid the premium entirely. Even nudging from 5% to 10% or 15% drops the rate meaningfully (4.00% → 3.10% → 2.80%).
- Buy a slightly less expensive home so a fixed amount of savings represents a larger percentage down.
- Time a larger down payment if you're close — the jump from 19.99% to 20% removes the premium completely.
That said, insurance isn't purely a cost. It's what allows Canadians to buy with as little as 5% down and often at lower interest rates than an uninsured mortgage, because the lender's risk is covered. For many first-time buyers, paying the premium and entering the market years earlier is the better financial move.
Frequently asked questions
Does CMHC insurance protect me? No. It protects the lender against loss if you default. You pay the premium, but the coverage is for the lender.
Can I pay the premium upfront instead of adding it to the mortgage? Usually yes, but most buyers roll it into the mortgage. Either way, the provincial sales tax on the premium must be paid in cash at closing.
Is the premium refundable if I sell early? Generally no. However, if you buy another home soon after, you may qualify for partial "portability" of your existing insurance.