Mortgage Default Insurance in Canada (CMHC) Explained

When it is mandatory and why it exists

In Canada, whether your down payment reaches 20% of the purchase price is a hard line. According to the Financial Consumer Agency of Canada (FCAC, 2025), a down payment below 20% makes the loan a high-ratio mortgage, and default insurance is mandatory before a lender will fund it. A down payment of 20% or more is a conventional mortgage and does not require this insurance.

Most buyers I work with start with one misunderstanding: they assume the insurance protects them. It does not. It protects the bank that lends the money. If a borrower defaults and the home, once repossessed and sold, does not cover the outstanding loan, the insurer makes up the lender’s shortfall.

So what does it do for you? It is the reason a lender will accept a buyer with as little as 5% down. Because that insurance backstops the lender, people who cannot yet put down a full 20% can enter the market sooner rather than waiting years to save. It is a cost — but it is also a ticket onto the field earlier.

How the premium is calculated: tiers by loan ratio

The premium is not based on the home price. It is based on your loan-to-value ratio (LTV) — the size of the loan relative to the price — and the smaller your down payment, the higher the rate. According to CMHC (2025), the standard mortgage default insurance premium rates are:

• Down payment of 15% to 20% (loan-to-value 80.01%–85%): premium rate 2.80%
• Down payment of 10% to 15% (loan-to-value 85.01%–90%): premium rate 3.10%
• Down payment of 5% to 10% (loan-to-value 90.01%–95%): premium rate 4.00%

Here is what that looks like in practice: on a $600,000 home with 5% down ($30,000), the loan is $570,000, and at a 4.00% rate the premium is roughly $22,800. That is not a small number — the less you put down, the more cash you keep in your pocket, but the larger the premium you owe.

The standard rates are effectively the same across all three insurers (CMHC, Sagen, Canada Guaranty). Your exact pricing is confirmed by your lender at the time of application.

One nuance worth understanding: because the rate is tied to your LTV band rather than to a flat fee, the difference between a 5% and a 10% down payment is not just the extra cash you put down — it also drops your premium rate from 4.00% to 3.10%. On a $600,000 home, moving from 5% to 10% down lowers the loan to $540,000 and the premium to roughly $16,740, a saving of about $6,000 on the premium alone, before counting the interest you would have paid on it over the years. When a buyer is close to the next tier, it is often worth finding the extra few thousand dollars to cross it.

The premium can be added to the mortgage — but Ontario PST is cash

Here is a distinction many buyers miss. The premium itself can usually be added to your mortgage principal and paid off across the full amortization, so you do not have to write a cheque for $20,000-plus on closing day. The trade-off is that it increases your loan balance and accrues interest over the life of the loan.

Ontario adds one more layer. According to CMHC (2025), premiums in Quebec, Ontario and Saskatchewan are subject to provincial sales tax (PST). In Ontario the rate is 8% of the premium — and that tax cannot be added to the mortgage. It must be paid in cash at closing.

Continuing the example above: a $22,800 premium means Ontario PST of 8%, or roughly $1,824, due in cash as part of your closing costs. When I build a buyer’s budget, I always break this line out on its own, so nobody discovers a cash gap days before closing.

The late-2024 changes: $1.5M cap and 30-year amortization

This was the most significant change in over a decade, and it matters especially in a high-priced market like the GTA. According to the Department of Finance Canada (2024), effective December 15, 2024:

• The price cap for insured mortgages rose from $1 million to $1.5 million. Homes priced between $1 million and $1.5 million can now be purchased with less than 20% down.
• All first-time home buyers, and anyone buying a newly built home (whether or not they are first-time buyers), can now access 30-year amortizations — up from the previous 25-year maximum on high-ratio loans.

Alongside the new cap, the minimum down payment is calculated in tiers (FCAC / Department of Finance Canada, 2025): 5% on the first $500,000 of the price, and 10% on the portion between $500,000 and $1.5 million. For example, on an $800,000 home: 5% of the first $500,000 ($25,000) plus 10% of the remaining $300,000 ($30,000) gives a minimum down payment of $55,000.

Homes priced at $1.5 million or more still require at least 20% down and cannot be insured.

The practical effect of these two changes together is meaningful for GTA buyers. Before December 2024, a family looking at a $1.2 million home had no insured option at all — they needed a full 20% down, or $240,000. Today that same family can qualify with a tiered minimum of $95,000, and a first-time buyer can stretch the loan over 30 years to bring the monthly payment down. The cost of that flexibility is the insurance premium and Ontario’s PST on it, which is exactly why understanding these numbers up front matters.

There is one direct way: put down 20% or more of the purchase price. The loan is then conventional, no default insurance is required, and you also avoid Ontario’s 8% PST on the premium.

But this is a trade-off to weigh, not simply a cost to minimize. Moving from 5% to 20% down often means assembling six figures of additional cash, and that money — kept as an emergency reserve, or used to enter the market sooner and lock in a price — may be worth more elsewhere. I usually run two numbers with clients: first, the total cost of a low down payment plus premium plus interest; second, the time and opportunity cost of saving a full 20%. Then we see which path fits your cash flow and your timeline.

• If you have ample cash and are not in a hurry, putting down 20% to skip the premium is a clean choice.
• If reaching 20% would take several more years and you already have stable income, a low down payment plus premium may let you buy sooner.

There is no universal right answer. The point is to lay the numbers out clearly before you decide.

Does CMHC insurance protect me?

No. Mortgage default insurance protects the lender, not the borrower. If you default and the home, once sold, does not cover the outstanding loan, the insurer reimburses the lender's loss. Its benefit to you is indirect: because of that protection, lenders are willing to approve mortgages with less than 20% down.

Can the premium be added to my mortgage?

Yes. The premium itself can usually be added to your mortgage principal and paid off over the full amortization, rather than paid up front at closing. Keep in mind that rolling it in means you pay interest on the premium. Separately, Ontario's 8% PST on the premium cannot be added to the mortgage and must be paid in cash at closing.

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

A down payment of 20% or more makes the loan conventional, so no default insurance is required and you also avoid Ontario's 8% PST. Homes priced at $1.5 million or more already require at least 20% down and cannot be insured in any case.

Can I buy a $1.2 million home with less than 20% down?

Yes. According to the Department of Finance Canada (2024), the insured mortgage price cap rose to $1.5 million effective December 15, 2024, so a $1.2 million home can be insured and bought with less than 20% down. The minimum down payment is tiered: 5% on the first $500,000 plus 10% on the portion from $500,000 to $1.2 million.

What is the difference between CMHC, Sagen and Canada Guaranty?

All three are approved mortgage default insurers in Canada. CMHC is the federal government agency; Sagen and Canada Guaranty are private companies. Their standard premium rates are effectively the same and their underwriting rules are broadly similar. Your lender decides which insurer to submit your application to, and exact pricing is confirmed at application.