Everything Canadian homebuyers need to know about mortgage default insurance — who needs it, what it costs, and how to minimize it.
Mortgage default insurance — commonly called CMHC insurance — is a type of insurance that protects Canadian lenders if a borrower stops making mortgage payments. It is not life insurance or disability insurance. It does not protect you as a borrower; it protects your lender. However, because it reduces the lender's risk, it also allows you to purchase a home with as little as 5% down and typically access lower interest rates than you might otherwise qualify for.
In Canada, mortgage default insurance is mandatory for any insured mortgage — that is, any mortgage where the down payment is less than 20% of the purchase price. It is provided by three federally regulated insurers: CMHC (Canada Mortgage and Housing Corporation), Sagen (formerly Genworth Financial Canada), and Canada Guaranty Mortgage Insurance Company.
You are required to purchase mortgage default insurance if all of the following apply:
If your down payment is 20% or more, your mortgage is considered a conventional mortgage and mortgage default insurance is not required — though some lenders may still require it in certain circumstances.
The premium you pay is based on your loan-to-value (LTV) ratio — the ratio of your mortgage to the property's purchase price. The higher your LTV, the higher the premium:
| Down Payment | LTV Ratio | Premium Rate |
|---|---|---|
| 5% | 95% | 4.00% of mortgage |
| 10% | 90% | 3.10% of mortgage |
| 15% | 85% | 2.80% of mortgage |
| 20%+ | 80% or less | Not required |
The premium is calculated on the insured mortgage amount, not the full purchase price. It is then added to your mortgage balance — you don't typically pay it as a lump sum, though you can. Provincial sales tax may also apply to the premium in some provinces (not Alberta).
Suppose you're buying a home in Calgary for $550,000 and you have a 10% down payment of $55,000. Your mortgage amount is $495,000. The applicable CMHC premium rate is 3.10%, so your premium is $495,000 × 3.10% = $15,345. This is added to your mortgage, making your total insured mortgage $510,345. You then make payments on $510,345 over your amortization period.
All three providers offer essentially the same premium rates — they are set by federal guidelines. The main difference is that your lender chooses which insurer they work with. As a borrower, you generally don't get to pick. The approval criteria are similar across all three, though there can be minor differences in how they handle certain situations like self-employed borrowers or rental properties.
Counterintuitively, having CMHC insurance can actually help you get a lower interest rate. Because your mortgage is insured (meaning the lender's risk is covered), lenders typically offer their best rates on insured mortgages. An uninsured conventional mortgage often comes with a small rate premium. That said, the cost of the CMHC premium itself usually outweighs the rate savings over time, so saving for 20% down is still generally advantageous if you can manage it.
Even if you qualify for a CMHC-insured mortgage, you must still pass the mortgage stress test. This means your lender will qualify you at the higher of your contracted rate plus 2%, or 5.25% — whichever is greater. The stress test applies to all Canadian mortgage applications, insured or not, at federally regulated lenders.