The name "mortgage insurance" sounds like it protects you. It doesn't. Mortgage default insurance in Canada protects your lender — and if you default and your home sells for less than your mortgage balance, the insurer pays the bank and then comes after you to recover that money. You paid for coverage that can be used to collect a debt from you.
That's the part nobody explains clearly. There's also the part about the true cost being nearly double what the premium table shows once you add interest and provincial tax. And the part about there being three insurers, not one. And the part about portability saving you thousands if you're moving within two years.
Here's everything you actually need to know.
What mortgage default insurance is — and isn't
When you buy a home with less than 20% down in Canada, federal law requires your lender to insure the mortgage. The insurance covers the lender's loss if you default and the sale of your home doesn't cover your remaining mortgage balance.
You pay the premium. The lender is the beneficiary. This is not ambiguous — it's the explicit structure of the product.
This is also different from mortgage life insurance, which is an optional product sold by banks at closing that pays off your mortgage if you die. The names sound similar. They are entirely different products. Mortgage life insurance is generally overpriced compared to a standalone term life insurance policy, but that's a separate conversation.
If you stop making payments and your lender sells your home for less than you owe, CMHC pays the shortfall to the bank. CMHC then has the right to pursue you for that amount. You bought insurance for the bank. The bank can now lean on that insurance to collect from you.
There are three approved mortgage default insurers in Canada: CMHC (Canada Mortgage and Housing Corporation, a federal Crown corporation), Sagen, and Canada Guaranty. Your lender assigns the insurer — you don't choose. All three charge the same premium rates for standard purchases. The differences matter mainly for self-employed borrowers and edge cases, which we'll cover below.
The premium rates
The premium is a percentage of your insured mortgage amount — not the purchase price. It's added directly to your mortgage balance, so you pay interest on it for the life of the loan.
Standard purchase (25-year amortization)
| Down payment | Loan-to-value | Premium rate |
|---|---|---|
| 5.00% – 9.99% | 90.01% – 95% | 4.00% |
| 10.00% – 14.99% | 85.01% – 90% | 3.10% |
| 15.00% – 19.99% | 80.01% – 85% | 2.80% |
30-year amortization (CMHC Home Start)
First-time buyers and buyers of newly-built homes can access a 30-year amortization on insured mortgages. This uses a separate premium table with a surcharge of 0.20% across all tiers.
| Down payment | Standard premium | 30-year premium | Surcharge |
|---|---|---|---|
| 5.00% – 9.99% | 4.00% | 4.20% | +0.20% |
| 10.00% – 14.99% | 3.10% | 3.30% | +0.20% |
| 15.00% – 19.99% | 2.80% | 3.00% | +0.20% |
The 30-year amortization lowers your monthly payment significantly — but costs 0.20% more in premium and substantially more in total interest over the life of the loan. It's a cash-flow tool, not a money-saver.
The true cost: what nobody tells you
Most buyers look at the premium percentage and think they understand their cost. They're looking at roughly half the picture.
The premium is added to your mortgage balance and accrues interest at your mortgage rate for the full amortization period. At a 4.5% mortgage rate over 25 years, every dollar of CMHC premium costs you approximately $1.68 in total (the dollar plus about 68 cents in interest). Then Ontario, Quebec, and Saskatchewan buyers pay provincial tax on the premium in cash at closing — a cost that cannot be rolled into the mortgage.
| Purchase scenario | CMHC premium | Interest on premium (25 yr at 4.5%) |
Ontario PST (8%) | True total cost |
|---|---|---|---|---|
| $600K home · 5% down $570K mortgage |
$22,800 | ~$15,600 | $1,824 | ~$40,200 |
| $900K home · 10% down $810K mortgage |
$25,110 | ~$17,200 | $2,009 | ~$44,300 |
| $1.2M home · 10% down $1.08M mortgage |
$33,480 | ~$22,900 | $2,678 | ~$59,100 |
The Ontario PST column is what shocks buyers at closing. It's due in cash on the day you take possession — not rolled into the mortgage, not payable after the fact. We'll cover this in detail below.
The interest figures above assume the premium stays in the mortgage for the full 25-year term at a constant 4.5% rate. In practice, the effective interest cost will vary with your actual rate and how long you hold the property. The point stands: the headline premium is approximately 60–70% of the true long-run cost.
The $1.5M cap and minimum down payment math
Before December 15, 2024, insured mortgages were capped at homes priced under $1 million. Anything at or above $1M required a 20% down payment — full stop. That cap has been raised to $1.5 million, which meaningfully changes the math for buyers in Vancouver, Toronto, and other expensive markets.
The minimum down payment formula uses a sliding scale:
- 5% on the first $500,000 of the purchase price
- 10% on the portion from $500,001 to $1,499,999
| Purchase price | Minimum down payment | Effective down % | Before Dec 2024 |
|---|---|---|---|
| $600,000 | $35,000 | 5.8% | Same |
| $800,000 | $55,000 | 6.9% | Same |
| $1,000,000 | $75,000 | 7.5% | $200,000 required (20%) |
| $1,200,000 | $95,000 | 7.9% | $240,000 required (20%) |
| $1,499,999 | $124,999 | 8.3% | $300,000 required (20%) |
A buyer purchasing a $1.2M home in Toronto now needs $95,000 down instead of $240,000. That's a $145,000 difference in upfront capital. For buyers who had equity but not the full 20%, this rule change opened the market considerably.
The PST cash bomb at closing
Three provinces charge provincial sales tax on the CMHC premium. Unlike the premium itself, this tax cannot be added to the mortgage — it must be paid in cash on closing day.
| Province | Tax rate on premium | Example: $900K home, 10% down ($25,110 premium) |
|---|---|---|
| Ontario | 8% PST | $2,009 cash at closing |
| Quebec | 9% QST | $2,260 cash at closing |
| Saskatchewan | 6% PST | $1,507 cash at closing |
| All other provinces | None | $0 |
Most buyers in Toronto and Montreal are blindsided by this. It shows up in the lawyer's statement of adjustments a few days before closing, on top of land transfer taxes, legal fees, and title insurance. Budget for it explicitly — it's not optional and it's not negotiable.
Is 20% down always the right call?
The conventional wisdom is to avoid CMHC insurance at all costs — save longer, put 20% down, skip the premium. The math isn't that straightforward.
The rate advantage you give up
Insured mortgages consistently get lower interest rates than uninsured mortgages — typically 10 to 25 basis points lower. This is because lenders can sell insured loans into the securitization market at favorable terms, reducing their cost of funds. On a $570,000 mortgage, 0.15% lower rate saves roughly $855/year, or about $21,000 over 25 years. That meaningfully offsets the CMHC premium.
The cost of waiting
Saving from 5% to 20% down on a $900,000 home means accumulating an additional $135,000. At a realistic savings rate, that takes 2–4 years for most buyers. During that time:
- You continue paying rent — often $2,000–$3,000/month in the same markets
- Home prices may appreciate, moving the target further away
- The CMHC premium you avoided is partly offset by 2–4 years of foregone equity building
| Scenario | Buy now with 5% down | Wait 3 years, buy with 20% down |
|---|---|---|
| Down payment (today's price) | $45,000 (5% of $900K) | $180,000+ (prices may rise) |
| CMHC premium | $34,200 (4% of $855K mortgage) | $0 |
| Rent paid while waiting | $0 | ~$90,000 (3 yrs × $2,500/mo) |
| Rate differential benefit | ~$21,000 over 25 yrs (0.15% lower rate) | $0 |
| Equity at year 3 | 3 years of principal paydown + appreciation | $0 (still renting) |
The CMHC premium is a real cost — but it's not automatically the wrong decision. In markets with meaningful appreciation, buying earlier with a smaller down payment often produces a better financial outcome than waiting to hit 20%. The right answer depends on your specific rent, savings rate, expected hold period, and local market conditions.
The three insurers — and why it matters
Strictest underwriting via automated Emili system
Most rigid on self-employed income documentation
Does not insure borrowed down payments
Does not accept stated income
Moderate underwriting flexibility
More accommodating for complex employment situations
Good alternative if CMHC declines
Does not insure borrowed down payments
Most flexible underwriting of the three
Best option for self-employed with non-traditional docs
Only insurer that accepts borrowed down payments
Accepts alternative credit history documentation
All three charge identical premium rates for standard purchases, so the cost to you is the same regardless of which insurer your lender uses. The difference is in who they'll approve.
A CMHC decline is not a rejection from the housing market. Ask your mortgage broker to re-submit to Sagen or Canada Guaranty. The lender assigns the insurer, but a good broker will know which insurer is most likely to approve your specific situation. This is one of the most overlooked options in Canadian mortgage advice.
Portability: how to avoid paying twice
If you sell your home and buy another within two years, you may be able to port (transfer) your CMHC insurance to the new property. This gives you a credit against any new premium — potentially saving you thousands.
| Time between closings | Credit on original premium |
|---|---|
| Within 6 months | 100% credit |
| 6 to 12 months | 50% credit |
| 12 to 24 months | 25% credit |
| After 24 months | No credit |
Worked example: You bought at $750,000 with 5% down. Your mortgage was $712,500, and your CMHC premium was $28,500. Fourteen months later, you sell and buy a $950,000 home, again with 5% down.
Without portability, your new premium on a $902,500 mortgage at 4.00% would be $36,100. With the 50% portability credit ($14,250), your net new premium is $21,850 — a saving of $14,250, plus interest on that amount over your amortization.
Portability conditions: your original property must be sold, the new home must be owner-occupied with the same intended use, and your original mortgage cannot be in arrears. If the new loan amount is larger, a top-up premium applies to the incremental portion only.
Self-employed applicants
Self-employed borrowers can qualify for insured mortgages at the same premium rates as salaried employees — there is no self-employed surcharge on the premium itself. The challenge is income documentation.
Income gross-up: Sole proprietors and partners in partnerships are allowed to gross up their stated net income by 15% for qualifying purposes, to partially offset business expense deductions that reduce taxable income on paper.
Documentation typically required: 24 months of self-employment, two years of Notices of Assessment plus T1 General tax returns, GST/HST returns, business bank statements, and ideally financial statements with a review engagement.
CMHC has the strictest self-employed underwriting of the three insurers. If CMHC declines a self-employed applicant on income documentation grounds, Canada Guaranty — which accepts bank statement income verification and alternative credit history — should be the next step. A mortgage broker experienced with self-employed borrowers is worth considerably more on these files than going directly to a bank.
What CMHC won't insure
- Homes priced at $1.5 million or more — these require 20% down with no exception
- Pure investment properties — insured mortgages require owner-occupancy of at least one unit
- Vacation or seasonal properties without year-round vehicular road access
- Borrowed down payments (CMHC only — Canada Guaranty will insure these)
- Properties with more than 4 units — separate CMHC MLI Select programs exist for larger rental buildings
- Refinances — once you refinance, the new mortgage is uninsured regardless of your equity position
The Eco Plus refund: 25% back on new builds
If you purchase a newly built home that meets specific energy efficiency standards, you may qualify for a CMHC Eco Plus refund of 25% of your mortgage default insurance premium. On a $900,000 new build with 10% down, that's a potential $6,278 refund.
The threshold is an EnerGuide rating of at least 40% better energy efficiency than the reference house code, or LEED certification (15% refund). You must apply within 24 months of your mortgage closing date.
This refund is almost never mentioned by lenders or real estate agents. If you're purchasing a newly built home, ask your builder for the EnerGuide rating before closing and apply to CMHC within two years. As of July 2025, this refund applies to newly built homes only — renovations are no longer eligible.
The five most common misconceptions
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Myth #1"CMHC insurance protects me." It protects your lender. CMHC pays the bank if you default, then pursues you for repayment. You bear all the risk and pay for coverage that benefits the lender.
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Myth #2"Once I hit 20% equity I can drop it." Canadian mortgage default insurance is permanent for the life of the mortgage. It does not cancel when equity crosses any threshold. The only exits are selling the property or refinancing into an uninsured mortgage.
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Myth #3"The premium is the full cost." The premium is added to your mortgage and accrues interest for 25+ years. The true all-in cost including interest is roughly 1.6–1.7× the headline premium. Add provincial tax in Ontario, Quebec, and Saskatchewan and the gap widens further.
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Myth #4"CMHC is the only insurer." There are three: CMHC, Sagen, and Canada Guaranty. Your lender assigns the one they use. A decline from CMHC can be re-routed to Sagen or Canada Guaranty — a fact that most buyers and even some bank employees don't know.
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Myth #5"Saving to 20% is always the smarter move." Sometimes it is. Sometimes it isn't. The insured mortgage rate advantage, the rent you pay while saving, the home price appreciation you miss, and what else you could do with that capital all factor in. The math varies by market, timeline, and individual situation.