CMHC, Sagen & Canada Guaranty: What Mortgage Default Insurance Really Is When You Put Less Than 20% Down

Step 1: Figure out whether you even need it — 20% is the line

Many first-time buyers hear “insurance” and assume it’s optional. It isn’t. In Canada this is a legal requirement:

• Less than 20% down (your loan is more than 80% of the price — a “high-ratio mortgage”) — you must carry default insurance. There’s no opting out.
• 20% down or more (loan is 80% of price or less — a “conventional mortgage”) — no default insurance required.

The key thing to understand: this insurance protects the lender, not you. If you can’t pay and the home is sold for less than what’s owed, the insurer reimburses the lender for the shortfall. In other words, you pay the premium and the bank is the beneficiary. Most clients miss this at first — but it explains the logic behind every rule that follows.

Step 2: Meet the three insurers — CMHC vs. Sagen vs. Canada Guaranty

Only three providers offer mortgage default insurance in Canada. Most people have only heard of CMHC, but there are three:

• CMHC (Canada Mortgage and Housing Corporation) — the federal government’s Crown corporation, the best-known of the three. “CMHC insurance” has practically become the generic name for this coverage.
• Sagen — a private company, formerly Genworth Canada, and the largest private mortgage insurer in the country.
• Canada Guaranty — another private, Canadian-owned company.

The most important point for you: all three charge essentially the same premium rates and operate under the same regulatory framework. In practice the percentages are identical across all three (5% down is 4.00% with any of them, and so on). So you don’t need to shop around for an insurer — and you couldn’t anyway, for the reason in the next step.

Step 3: Understand a counterintuitive fact — the lender picks the insurer, not you

This trips up more clients than anything else: your lender chooses which insurer to use, not you.

• You pay the premium, but you don’t get to choose. The bank selects CMHC, Sagen, or Canada Guaranty based on its own relationships and underwriting systems.
• Because the three charge nearly identical rates, which insurer you end up with usually has no real impact on your cost, so there’s nothing to worry about here.
• What’s actually worth comparing is different lenders’ mortgage rates and terms — not which insurer sits behind them.

My advice to buyers: put your energy into choosing the right rate and the right mortgage broker. Don’t fixate on the insurer — it’s neither something you control nor a variable that meaningfully changes your cost.

Step 4: How the premium is calculated — less down means a higher rate

The premium is a percentage of the loan amount (not the purchase price), and the percentage depends on your loan-to-value (LTV) ratio — i.e., how much you put down. According to CMHC (2025), the standard rates are:

• 5%–9.99% down (90.01%–95% LTV): premium = 4.00% of the loan
• 10%–14.99% down (85.01%–90% LTV): premium = 3.10% of the loan
• 15%–19.99% down (80.01%–85% LTV): premium = 2.80% of the loan

Example: on an $800,000 home with 5% down ($40,000), the loan is $760,000 and the premium is $760,000 × 4.00% = $30,400. Bump the down payment to 15% ($120,000) and the loan drops to $680,000, so the premium is $680,000 × 2.80% = $19,040 — putting more down saves you over ten thousand on this line alone.

One more thing: Ontario (along with Manitoba, Quebec and Saskatchewan) charges provincial sales tax (PST) on the premium — 8% in Ontario. This tax cannot be added to the mortgage; it must be paid in cash on closing day. On the $30,400 premium above, that’s roughly $2,432 you need to have on hand.

Many clients worry the premium is a lump sum they have to produce in cash. The main part isn’t:

• The premium itself can be added to your mortgage principal and paid off over the full amortization. So you don’t have to hand over tens of thousands at closing — it becomes part of your loan.
• The trade-off: you pay interest on it. Once rolled into the principal, you’re paying it back with interest over the life of the loan, so the true long-run cost is higher than the headline figure.
• The PST must be paid in cash. As noted above, Ontario’s 8% provincial tax on the premium cannot be financed and must be settled on closing day. This is a closing cost first-time buyers routinely forget to budget for.

So when you budget, remember two things: the premium increases your loan amount (and the interest on it), and the PST needs to be set aside separately in cash.

In late 2024 the federal government made two major changes to this system that directly affect GTA buyers, and you need to know both:

• Insurable price cap raised to $1.5M. According to the Government of Canada (2024), effective December 15, 2024, the maximum home price eligible for default insurance rose from $1 million to $1.5 million. That means homes priced up to $1.5M can now be bought with less than 20% down.
• But the down-payment formula is still tiered. Below 20%, there’s a minimum: 5% on the first $500,000 and 10% on the portion above $500,000. So on a $1.5M home, the minimum down payment is about $125,000 ($500K × 5% + $1M × 10%) — versus the 20% ($300,000) that used to be required.
• 30-year amortization expanded. According to the Government of Canada (2024), also effective December 15, 2024, all first-time buyers and all buyers of new builds (first-time or not) can choose a 30-year amortization on insured mortgages (up from a 25-year cap). A longer amortization lowers monthly payments but means more total interest.

The real-world impact on the GTA is significant: in a market like Toronto where $1M–$1.5M prices are common, these two changes open the door for a wave of buyers who previously “didn’t have 20% down.”

Put it all together, and here’s the real decision for a GTA buyer:

• It’s a “premium for early entry” tool. Low-down-payment insurance lets you buy without saving the full 20%. In a rising market, getting in a few years earlier can save more than the premium costs — but that’s a bet on prices, not a sure thing.
• Every down-payment tier you clear saves money. Moving from 5% to 10% to 15% steps the rate down (4.00% → 3.10% → 2.80%), and at 20% the insurance disappears entirely. If you’re close to the next tier, it’s worth running the numbers.
• Don’t forget the PST cash. Ontario’s 8% sales tax on the premium is due in cash at closing — make sure it’s in your closing-cost budget.
• The $1.5M cap is especially useful in Toronto. Across many GTA pockets where prices land between $1M and $1.5M, the new rule genuinely widens the options for low-down-payment buyers.

My advice: before you make an offer, have your mortgage broker build a table comparing the premium + PST + monthly payment at different down-payment levels. You’ll see at a glance how much a slightly larger down payment saves — and exactly how much cash you need on closing day.

How much do I need to put down to avoid this insurance?

A down payment of 20% or more (a loan of 80% of the price or less — a conventional mortgage) means no default insurance. Any down payment below 20% legally requires it. So 20% is the dividing line.

How much is the premium, and do I pay it or does the bank?

You — the buyer — pay it, as a percentage of the loan amount, and the less you put down the more it costs. According to CMHC (2025): 4.00% for 5%–9.99% down, 3.10% for 10%–14.99%, and 2.80% for 15%–19.99%. The insurance protects the lender, but you pay the premium, usually added to your mortgage and amortized. In Ontario you also pay 8% PST on the premium, and that PST must be paid in cash at closing.

Which of CMHC, Sagen, and Canada Guaranty should I choose?

You don't choose — your lender does. Fortunately the three charge essentially the same rates and operate under the same regulation, so which insurer you end up with usually has no real effect on your cost. What you should compare is different lenders' mortgage rates and terms, not the insurer behind them.

Is it true the price cap is now $1.5M and I can amortize over 30 years?

Yes. According to the Government of Canada (2024), effective December 15, 2024, the insurable price cap rose from $1 million to $1.5 million, and all first-time buyers plus all buyers of new builds can now choose a 30-year amortization on insured mortgages (up from a 25-year cap). Both changes matter a lot in the GTA, where $1M–$1.5M prices are common.

Can I pay the premium off upfront, or must it be rolled into the mortgage?

The premium is typically added to your mortgage principal and amortized over the loan (which means you pay interest on it). Whether you can instead pay it upfront depends on your lender's policy — ask your mortgage broker. Either way, Ontario's 8% PST on the premium must be paid separately in cash at closing and cannot be rolled into the mortgage.