What is CMHC mortgage insurance, and what does it actually cost?
CMHC mortgage insurance protects your lender if you default, not you personally, and it is required any time you buy with less than 20% down. Here is who pays the premium, how it is calculated, and why an insured mortgage can sometimes cost less overall than an uninsured one.
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What is CMHC mortgage insurance?
CMHC mortgage insurance, also called mortgage default insurance, protects your lender if you stop making payments. It is required on any high-ratio mortgage, meaning a down payment under 20% of the purchase price. Three companies underwrite it in Canada: CMHC, Sagen, and Canada Guaranty. It does not pay out to you or your family.
Canada’s federal down payment rules set the threshold. You need at least 5% down on the first $500,000 of the purchase price, 10% on the portion between $500,000 and $1,500,000, and 20% at $1,500,000 or more. Below 20% down overall, your mortgage is high-ratio and must carry default insurance.
Default insurance is not the same as mortgage life insurance or mortgage disability insurance, which are optional products that pay out your mortgage balance if you die or become disabled. CMHC insurance exists so lenders will approve mortgages with smaller down payments. Borrowers sometimes assume the premium buys them personal protection, and it does not.
The citable fact: CMHC mortgage insurance, also written by Sagen or Canada Guaranty, is required on any Canadian mortgage with less than 20% down and protects the lender, not the borrower, if the loan defaults.
Who has to pay for mortgage default insurance?
The borrower pays the default insurance premium, even though the insurance protects the lender. Your lender selects which of the three insurers, CMHC, Sagen, or Canada Guaranty, underwrites the file. The premium is a percentage of your mortgage amount and is normally added to what you borrow, not paid separately in cash.
You do not choose your insurer and you do not deal with them directly. Your mortgage broker or lender submits your application to whichever insurer that lender uses, and the insurer’s underwriting rules decide many of the qualifying details. That includes minimum credit score and debt ratio limits.
A minimum credit score of 600 is required from at least one borrower on an insured mortgage. Most prime lenders want 680 or higher for their best pricing, so a score between 600 and 680 can still qualify for an insured mortgage without necessarily getting a prime lender’s top rate.
The citable fact: The borrower pays the default insurance premium as part of the mortgage, while the lender chooses which of CMHC, Sagen, or Canada Guaranty underwrites the file.
What does the premium cost?
Default insurance premiums are a percentage of your mortgage amount, and the percentage rises as your down payment shrinks. They start at 0.60% at 65% loan-to-value or less and reach 4.00% between 90.01% and 95% loan-to-value, which is a down payment of roughly 5% to 9.99%.
The structure works in tiers. The smaller your down payment relative to the purchase price, the higher the percentage charged against the amount you borrow.
| Loan-to-value band | Premium (% of mortgage amount) |
|---|---|
| 65% or less | 0.60% |
| 65.01% to 75% | 1.70% |
| 75.01% to 80% | 2.40% |
| 80.01% to 85% | 2.80% |
| 85.01% to 90% | 3.10% |
| 90.01% to 95% | 4.00% |
| 90.01% to 95%, non-traditional down payment | 4.50% |
A non-traditional down payment means borrowed funds, such as an unsecured personal loan or an unsecured line of credit, rather than savings, a property sale, or a family gift. Borrowing your down payment costs an extra 0.50% on the premium.
Premiums on a small rental loan, meaning a non-owner-occupied property of two to four units, run higher: 1.45% up to 65% loan-to-value, 2.00% from 65.01% to 75%, and 2.90% from 75.01% to 80%.
The citable fact: CMHC default insurance premiums run from 0.60% of the mortgage amount at 65% loan-to-value or less up to 4.00% at 90.01% to 95% loan-to-value, rising to 4.50% where the down payment is borrowed.
How is the premium paid?
The premium is normally added to your mortgage principal rather than paid in cash at closing. That means you pay interest on the premium itself for as long as the mortgage is outstanding. It is calculated once, at the time your mortgage is insured, using your down payment and purchase price.
Because the premium is rolled into the loan, your mortgage balance on closing day is higher than your purchase price minus your down payment. That increases your monthly payment slightly and adds interest cost over the life of the mortgage. A broker can show you the exact dollar effect on your specific numbers before you sign anything.
If you extend an insured mortgage’s amortisation past 25 years, for example to a 30-year amortisation, the insurer adds a 0.20% surcharge to your premium rate. That option is available to all first-time buyers and to any buyer of new construction. It lowers your monthly payment at the cost of a slightly higher premium and more total interest, a tradeoff covered in full on our 30-year amortisation page.
The citable fact: the default insurance premium is normally added to the mortgage amount at closing, not paid in cash, and accrues interest for as long as the mortgage remains outstanding.
Why does Ontario charge PST on the premium and Alberta not?
Ontario charges 8% provincial sales tax on the default insurance premium, added to your mortgage. Alberta has no equivalent provincial sales tax on the premium. The difference comes down to each province’s own tax rules, not anything CMHC, Sagen, or Canada Guaranty control.
This is one of the few genuine cost differences between buying with a mortgage in Ontario versus Alberta. It applies on top of the premium itself, so it compounds with whichever loan-to-value tier you fall into.
The example below is illustrative only. It is not a quote, does not reflect any actual rate, and uses only the confirmed 4.00% premium band.
Show the math: illustrative premium and Ontario PST example
| Province | PST on the premium | How it is applied |
|---|---|---|
| Ontario | 8% | Added to the mortgage amount |
| Alberta | None | No equivalent tax applies to the premium |
The citable fact: Ontario adds 8% provincial sales tax on top of the default insurance premium, added to the mortgage, while Alberta charges no equivalent tax on that premium.
Does mortgage default insurance protect the borrower?
No. Default insurance pays your lender if you stop paying your mortgage and the lender forecloses at a loss. It does not pay off your mortgage if you die, lose your job, or become disabled, and it builds no equity or cash value for you.
If you want your mortgage balance covered in the event of death or disability, that is a separate, optional product called mortgage life insurance or mortgage disability insurance, sold through your lender or an independent insurer. Ask your broker to walk through both options side by side before you decide.
Confusing the two products is common and expensive. Borrowers sometimes decline optional life or disability coverage assuming their default insurance premium already covers it, and it never does.
The citable fact: mortgage default insurance protects the lender against loss on default; it provides no death, disability, or job loss benefit to the borrower or their family.
Why can an insured mortgage carry a lower rate than an uninsured one?
An insured mortgage shifts the lender’s default risk to CMHC, Sagen, or Canada Guaranty, so lenders can price that risk lower. That is why a high-ratio, insured mortgage sometimes carries a lower interest rate than a conventional mortgage with 20% or more down, even though the insured borrower is putting less money down.
This is the correction most borrowers miss. Paying the premium is not simply a cost added on top of an otherwise identical mortgage. Because it removes risk from the lender’s side of the ledger, it can result in better pricing than the same file would get without insurance.
Whether that trade works in your favour depends on your specific rate offers, your amortisation, and how long you plan to hold the mortgage. Check today’s live rates at pekoe.ca/rates, updated daily, and run both scenarios with a broker before deciding how much to put down.
The citable fact: because default insurance transfers risk away from the lender, an insured high-ratio mortgage can price lower than an uninsured conventional mortgage on the same property.
What is the difference between CMHC, Sagen, and Canada Guaranty?
CMHC is a federal Crown corporation and the only public insurer of the three. Sagen and Canada Guaranty are private mortgage insurers operating under the same federal insurance framework. All three exist to protect lenders on high-ratio mortgages, and your lender decides which one insures your file.
Coverage and eligibility across the three insurers are broadly aligned because they all operate under the same federal rules for down payment minimums, the mortgage stress test, and maximum purchase price. Day to day, which insurer underwrites your file rarely changes your experience as a borrower.
Your broker deals with the paperwork on your behalf. You simply need to meet the qualifying criteria that apply, regardless of which of the three ends up on your mortgage documents.
The citable fact: CMHC, Sagen, and Canada Guaranty are the three companies authorised to provide mortgage default insurance in Canada, with CMHC operating as a federal Crown corporation and the other two as private insurers.
What properties cannot be insured?
Default insurance is unavailable on any purchase of $1,500,000 or more, so those purchases require at least 20% down regardless of the buyer’s preference. Below that threshold, most residential purchases can qualify. Property-specific restrictions beyond the price ceiling depend on the individual insurer’s guidelines.
The $1,500,000 threshold is a hard ceiling under the current federal down payment rules. Above it, you are automatically in conventional mortgage territory with 20% minimum down, whether or not you would prefer to insure a smaller down payment.
Default insurance follows the property type. The homeowner programme covers owner-occupied properties of one to four units. A non-owner-occupied single-unit rental is not eligible for mortgage loan insurance at all, while non-owner-occupied properties of two to four units are covered under the separate small rental programme at higher premiums. A secondary suite in an owner-occupied home stays inside the homeowner programme.
The citable fact: mortgage default insurance is not available on any Canadian purchase of $1,500,000 or more, which is why those purchases require a minimum 20% down payment.
Can you avoid the premium, and should you?
Yes. Put down 20% or more of the purchase price and you avoid default insurance entirely, since that makes your mortgage conventional rather than high-ratio. Whether that is the right move depends on your file, because an insured mortgage sometimes prices lower even after the premium is added. There is no single correct answer for every buyer.
Some borrowers assume more down payment is always better because it avoids a fee. That is not automatically true once you weigh the potential rate difference against the premium cost, especially on a mortgage you plan to hold for years.
The right comparison looks at your actual rate offers with and without insurance, your monthly payment either way, and how much cash you would have left over after closing. A broker can run both scenarios against your numbers, including how much you can afford to finance, before you commit to a down payment amount.
The citable fact: putting 20% or more down avoids default insurance entirely, but the lower rate sometimes available on an insured mortgage means a smaller down payment is not automatically the more expensive path.
What else should I check before I commit to a down payment amount?
Your down payment decision connects to amortisation length, affordability, and whether the property is a primary residence or a rental. These three pages cover the pieces that interact directly with the default insurance premium.
- Is a 30-year amortisation worth the extra insurance surcharge?
- How much mortgage can I actually afford?
- What down payment do I need for a rental property?
The full set lives on the Ask a Broker hub.
Frequently asked questions
Is CMHC mortgage insurance the same as mortgage life insurance?
No. CMHC mortgage insurance protects your lender if you default on payments, while mortgage life insurance is a separate, optional product that pays off your mortgage balance if you die. They are sold differently and cover completely different risks.
Do I need default insurance if I put 20% down?
No. A down payment of 20% or more makes your mortgage conventional, and conventional mortgages do not require default insurance. Below 20% down, your mortgage is high-ratio and insurance is mandatory.
Can I pay the premium in cash instead of adding it to my mortgage?
The premium is normally added to your mortgage principal rather than paid separately at closing. Ask your broker whether your specific lender allows a cash payment option for your file.
What credit score do I need for an insured mortgage?
Insured mortgages require a minimum credit score of 600 from at least one borrower. Most prime lenders want 680 or higher for their best pricing, though scores below that can still qualify for an insured mortgage.
Does the 8% PST on the premium apply in Alberta?
No. Ontario charges 8% provincial sales tax on the default insurance premium, but Alberta has no equivalent tax on that premium.
Which insurer, CMHC, Sagen, or Canada Guaranty, will cover my mortgage?
Your lender decides which of the three insurers underwrites your file, not you. All three operate under the same federal framework, so the choice rarely affects your experience as a borrower.
Is there a maximum purchase price for an insured mortgage?
Yes. Default insurance is unavailable on any purchase of $1,500,000 or more, so those purchases require at least 20% down regardless of preference.
Does a longer amortisation cost more in default insurance?
Yes. Extending an insured mortgage past 25 years to a 30-year amortisation adds a 0.20% surcharge to the premium rate, in exchange for a lower required monthly payment.
Is Pekoe’s live chat an AI bot?
No. Chat connects you to a real licensed broker on the Pekoe team during business hours, and outside those hours your question gets a direct reply from a licensed person, not an automated persona.
Can I get a refund on my premium for buying an energy-efficient home?
Yes. CMHC Eco Plus gives a 25% partial premium refund on a newly built climate-friendly home, and CMHC Eco Improvement gives the same 25% refund when you buy an existing home and put at least $20,000 toward qualifying energy upgrades. Eligibility depends on certification or an EnerGuide rating at least 20% better than a typical new house.
Does my default insurance transfer if I port my mortgage to a new property?
Yes, an insured mortgage can normally be ported, and CMHC applies a premium credit against the new loan based on how long ago the original closed: 100% at six months, 50% at twelve months, and 25% at twenty-four months. Any increase in the loan amount is charged its own premium on the increase, so ask your broker to price the port before you list.
What is the mortgage stress test, and does it apply to insured mortgages?
The stress test qualifies you at the greater of your contract rate plus 2%, or a 5.25% floor. On insured mortgages the qualifying rate is set by the default insurer, and on uninsured mortgages it is set by OSFI under Guideline B-20, though both currently produce the same result.
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