CMHC Mortgage Insurance: When You Need It and What It Costs
Why Does CMHC Insurance Exist?
When you put down less than 20%, you're borrowing more than the home is worth — at least in the lender's view. That creates risk. If you default and the lender has to sell the home quickly, they might not recover the full mortgage amount.
That's where mortgage default insurance comes in. It protects the lender, not you. If you stop paying and the home sells for less than the mortgage balance, the insurance company pays the difference.
This might seem like it's all downside for you — and yes, it's an extra cost. But it also unlocks something essential: the ability to buy now with a smaller down payment, rather than waiting years to scrape together 20%.
Three Providers
CMHC is the household name, but there are actually three mortgage default insurers in Canada:
- CMHC (Canada Mortgage and Housing Corporation) — backed by the federal government
- Sagen (formerly Genworth)
- Canada Guaranty
The premium rates in this article are the ones CMHC publishes. When people say "CMHC insurance," they usually just mean mortgage default insurance, regardless of which provider actually issues it. Your lender arranges the insurance for you and might use any of the three.
When Is CMHC Insurance Required?
CMHC insurance is required if your down payment is less than 20%.
The purchase price for an insured mortgage must be below $1,500,000. If you're buying a property at or above that threshold, you need a 20% down payment (no insurance available).
How Much Does It Cost?
The insurance premium depends on your loan-to-value ratio — essentially, how much you're borrowing compared to the home's purchase price.
- 5% down (95% LTV): 4.00% of the mortgage amount
- 10% down (90% LTV): 3.10% of the mortgage amount
- 15% down (85% LTV): 2.80% of the mortgage amount
CMHC calculates the premium as a percentage of the loan, based on the size of your down payment. An eligible 30-year amortization (first-time buyers or buyers of a newly built home) adds 0.20 percentage points, so the same three bands become 4.20%, 3.30% and 3.00%.
How the Premium Gets Added to Your Mortgage
You can pay the insurance premium in a lump sum or add it to your mortgage balance. If you add it, it's paid off over your amortization period (typically 25 years, or up to 30 years for first-time buyers or buyers of a newly built home, as of December 2024).
This sounds good on the surface — no huge bill at closing — but it means you're paying interest on the insurance cost itself. You end up paying more than the premium amount by the time the mortgage is done.
There's one exception: in Quebec, Ontario and Saskatchewan, the premium is also subject to provincial tax, and that tax can't be added to your mortgage — you pay it separately, and the Financial Consumer Agency of Canada says you must pay it when you get your mortgage:
- Ontario: 8% retail sales tax (RST) on the insurance premium
- Quebec: 9% tax on insurance premiums (rising to 9.975% for premiums paid after December 31, 2026)
- Saskatchewan: 6% provincial sales tax (PST) on the insurance premium
Worked Example: $600,000 Home with 10% Down
Let's walk through a realistic scenario to see the full impact.
Your situation:
- Purchase price: $600,000
- Down payment: $60,000 (10%)
- Mortgage amount before insurance: $540,000
- Interest rate: 4.8%
- Amortization: 25 years
- Location: Ontario
Step 1: Calculate the Insurance Premium
Mortgage amount: $540,000
Insurance rate: 3.10% (for 10% down)
Insurance premium: $540,000 × 3.10% = $16,740
Step 2: Add Ontario Retail Sales Tax on the Premium
Ontario RST: $16,740 × 8% = $1,339
Your total insurance cost: $16,740 premium (added to your mortgage) + $1,339 RST (paid separately; it can't be added to your mortgage) = $18,079
Step 3: Calculate Your Total Mortgage
Mortgage before insurance: $540,000
Insurance premium added: $16,740
Total mortgage amount: $556,740
Step 4: Calculate Your Monthly Payment
Using a standard Canadian mortgage calculation at 4.8% (compounded semi-annually) over a 25-year amortization:
Monthly payment on $556,740 = approximately $3,175
Comparison: No Insurance with 20% Down
If you waited and saved $120,000 (20% down):
- Mortgage: $480,000
- Monthly payment at 4.8% (compounded semi-annually) for 25 years: approximately $2,737
The difference: $438/month, or about $5,250 per year, to buy sooner with less saved.
For many first-time buyers, that's worth it.
The Real Tradeoff: Buy Now or Wait
This is the fundamental question CMHC insurance creates: Do you buy now and pay insurance, or save longer and avoid it?
Buy now with CMHC insurance if:
- You're tired of renting and want stability
- Home prices in your area are rising faster than you can save
- You have a stable job and income
- You can afford the higher monthly payment (with the stress test factored in)
- You want to start building equity rather than paying rent
Wait and save for 20% down if:
- You're only a few years away from 20%
- You're uncertain about your job or income
- You want maximum financial flexibility
- Interest rates are expected to fall (though nobody can predict this perfectly)
- You want to avoid any insurance cost
Neither choice is objectively "right." It's about your situation, risk tolerance, and timeline.
Common Questions About CMHC Insurance
Can I cancel the insurance once I reach 20% equity?
Not easily. Most lenders require you to wait until your mortgage renewal, and then you'd need to refinance — a costly process. Some lenders offer early removal at 20% equity if you pay a small fee, but this varies. Check with your lender before signing the mortgage.
Does CMHC insurance protect me if I default?
No. The insurance protects the lender. If you stop paying and the home is foreclosed and sold for a loss, the insurance pays the lender's shortfall. You're still liable for any deficiency.
Does my credit score affect the insurance cost?
No. The insurance premium is based solely on your loan-to-value ratio, not your creditworthiness. However, your credit score does affect the mortgage interest rate you'll qualify for, which significantly impacts your monthly payments.
Using Our Calculator
To see exactly how CMHC insurance affects your specific situation, use our mortgage calculator. Toggle the CMHC insurance option on and off to see the monthly payment difference. You can also run scenarios: "What if I waited two more years to save more down payment?" The numbers will update instantly.
For the premium on its own, our mortgage insurance calculator shows CMHC's premium rates by down payment, the 30-year surcharge and the price cap.
For a fuller picture of what you can afford before shopping for a property, use our affordability calculator, which factors in CMHC insurance in its calculations.
The Down Payment Sweet Spots
Not all down payment percentages are created equal. Here are the sweet spots to consider when planning your savings target:
5% down is the absolute minimum for homes priced at $500,000 or less. Your insurance premium is 4.00%, the highest tier. But it gets you into the market with the least cash upfront. On a $400,000 home, you need just $20,000 down (plus closing costs).
10% down drops your premium to 3.10% — almost a full percentage point lower. For homes priced above $500,000 and below $1,500,000, the minimum down payment is 5% on the first $500,000 and 10% on the portion above $500,000. On an $800,000 home, that's $25,000 + $30,000 = $55,000 (about 6.9%), and the minimum gets closer to 10% as the price approaches $1,500,000. At $1,500,000 or more, you need at least 20% down because the mortgage can't be insured.
15% down gives you the lowest insured premium at 2.80%, but the savings over 10% are relatively small. If you're already at 10% and could stretch to 15%, crunch the numbers carefully — the extra savings years might not be worth the reduced premium.
20% down eliminates the insurance entirely. This is the biggest single jump in savings, but it requires substantially more cash. On a $600,000 home, 20% is $120,000 compared to $60,000 at 10%. That extra $60,000 could take years to save, during which home prices and rents continue to rise.
How CMHC Insurance Interacts with the Stress Test
Here's something many buyers miss: CMHC insurance doesn't exempt you from the mortgage stress test. You still need to qualify at the minimum qualifying rate: the greater of your contract rate plus 2% or 5.25%. It's the same mortgage stress test that federally regulated lenders apply to uninsured mortgages.
In fact, the insurance premium increases the amount you're qualifying for, since it's added to your mortgage. Using our earlier example, you're qualifying on $556,740 (mortgage plus insurance), not $540,000. That slightly reduces the maximum home price you can afford.
This is why running the numbers through our affordability calculator is so important — it accounts for this interaction automatically.
Portable and Assumable: Two Hidden Benefits
Most people don't realize that CMHC insurance comes with two potential benefits:
Portability means that if you sell your home and buy another before your mortgage term is up, you can transfer your existing insurance to the new property. You might need to top up the premium if the new mortgage amount is higher, but you don't start from scratch.
Assumability means that a buyer purchasing your home could potentially take over your mortgage and its insurance. In a rising-rate environment, an assumable mortgage at a lower rate can actually make your home more attractive to buyers.
Neither of these benefits is guaranteed — they depend on your lender and the specifics of your situation — but they're worth knowing about.
The Bottom Line
CMHC insurance lets you buy sooner with less saved. It costs money — the 2.80%–4.00% premium plus interest on that amount over your amortization. But for many first-time Canadians, it's the only practical path to homeownership. And since December 2024, first-time buyers or buyers of a newly built home can stretch to a 30-year amortization even with an insured mortgage, lowering monthly payments further.
The key is understanding the tradeoff clearly. You're not getting a "free pass" — you're paying a fee to compress your timeline. Once you know what that fee is, you can make an informed decision about whether it's worth it for your situation.
Budget 2026 proposed further optional-insurance and missing-middle changes; those proposals are not in force on the product rules above. See Budget 2026 mortgage proposals.
Ready to see the numbers? Use our mortgage calculator to compare scenarios with and without insurance. Input your down payment size and watch the monthly payments change in real time.