High-Ratio Mortgage Default Insurance in Ontario: The Under-20% Down Payment Guide

When it is mandatory, how the premium is calculated, and the cash tax Ontario buyers forget

Most buyers are surprised to learn that if they put less than 20% down, they have to buy an insurance policy that does not protect them at all: it protects the lender. In my deals I see this catch people out constantly, especially the cash tax Ontario tacks on at closing. Here is the whole system explained: when it is mandatory, who the three insurers are, how the premium is calculated and paid, the Ontario tax buyers routinely forget, and the December 2024 rule changes that reshaped the math. By the end you will know whether to scrape together a full 20% or accept a high-ratio mortgage.

1. What makes a mortgage high-ratio

There is one line that decides everything: is your down payment at least 20% of the price? At 20% or more you have a conventional mortgage. Below 20% you have a high-ratio mortgage. According to canada.ca (2024), a high-ratio mortgage is legally required to carry default insurance. This is not optional, it is not a product you shop for on the side, and without it the loan simply will not be approved.

The policy protects the lender, not you. If you default and the lender cannot recover the full balance at sale, the insurer covers the shortfall. You pay the premium; the bank is the beneficiary. I describe it to clients as the price of admission for entering the market with less than 20% down.

2. The three insurers: CMHC, Sagen, Canada Guaranty

Three companies provide mortgage default insurance in Canada: CMHC (Canada Mortgage and Housing Corporation, the federal Crown agency), Sagen (formerly Genworth Canada, private), and Canada Guaranty (private). Many people assume CMHC is the only option; in fact the other two compete directly with it. The good news for buyers is that the premium tiers are essentially identical across all three, and your lender usually decides which one to use, so you do not need to shop between them.

3. Minimum down payment is a sliding scale

According to canada.ca (2024), the minimum down payment in Canada is not a single flat percentage. It steps up with price:

4. How the premium is calculated

The premium is a one-time charge set by your loan-to-value ratio (loan amount divided by price). According to CMHC (2025), the rates for owner-occupied homes (1-4 units) are as follows, and Sagen and Canada Guaranty match them:

Loan-to-value -> premium rate:
90.01%-95% (5%-10% down) -> 4.00%
85.01%-90% (10%-15% down) -> 3.10%
80.01%-85% (15%-20% down) -> 2.80%
75.01%-80% -> 2.40%
65.01%-75% -> 1.70%
65% and under -> 0.60%

The pattern is simple: the smaller the down payment, the higher the loan-to-value, the higher the premium. At exactly 20% down the premium disappears entirely.

A worked $500,000 example

Price $500,000, 5% down ($25,000), loan $475,000, loan-to-value 95% -> 4.00% rate. Premium = $475,000 x 4.00% = roughly $19,000. That $19,000 is added to your mortgage principal, so you actually borrow about $494,000 and repay the premium gradually inside your monthly payments. You do not write a cheque for it on closing day.

5. Ontario’s hidden cost: 8% PST in cash

This is the item buyers most often miss and the one most likely to blindside them at closing. According to nesto / Ratehub (2025), Ontario (along with Quebec and Saskatchewan) charges a provincial sales tax of 8% on the mortgage insurance premium. The critical distinction: the premium can be financed into the mortgage, but this PST cannot. It must be paid in cash on closing day.

Continuing the example: premium $19,000 x 8% = $1,520. That $1,520 comes out of pocket, stacked on top of legal fees, property tax adjustments, land transfer tax, and other closing costs. I have watched more than one buyer leave this out of their budget and scramble for cash days before closing. Set it aside early.

6. The December 15, 2024 rule changes

According to canada.ca (2024), the federal government enacted the largest mortgage reforms in decades effective December 15, 2024. Two changes matter directly to high-ratio buyers:

1. Insured price cap raised from $1M to $1.5M. Homes previously over $1,000,000 required 20% down; the cap is now $1,500,000, so more expensive homes can be bought with less than 20% down (following the sliding scale above).
2. 30-year amortization expanded. All first-time buyers, and anyone buying a newly built home regardless of whether they are first-time or high-ratio, can now choose a 30-year amortization (previously insured mortgages were capped at 25 years). A longer amortization lowers the monthly payment but increases total interest paid.

7. Should you put exactly 20% to avoid it?

This is my most-asked question, and the answer depends on your cash position and timing rather than a simple yes or no:

The case for 20%: you save the premium ($19,000 in the example) and the Ontario 8% PST, your principal is lower, and you pay less total interest.
The cost of 20%: you tie up far more cash at once, at a real opportunity cost. If reaching 20% delays your purchase by a year or two while prices rise, the saved premium may not come close to covering the appreciation you missed.
One counterintuitive point: because a high-ratio insured loan carries no lender risk, banks often offer lower interest rates on insured mortgages than on conventional ones. So in some cases putting 20% down can actually get you a slightly higher rate. I generally have clients weigh the total premium plus PST against the opportunity cost of waiting and any rate difference before deciding.

Arthur Zhao

Real Estate Broker · FRI · ABR · SRS · PSA · MCNE · E-PRO · CLHMS & GUILD Elite · REAIS

VP & Branch Manager, Bay Street Group Inc.

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