What Is CMHC Mortgage Insurance in Canada and When Do You Need It?

You’ve been saving for a down payment, you’ve crunched the numbers on a condo you can actually afford, and then someone mentions “CMHC insurance” — and suddenly there’s an extra cost you weren’t expecting. You’re not buying insurance for yourself. You’re not insuring the home. You’re buying insurance that protects the bank, and you’re paying for it. That’s the part that trips people up. CMHC mortgage default insurance exists because lenders get nervous when buyers put less than 20% down, and the federal government created a system where that risk gets insured — at your expense. Here’s what it actually is, when it kicks in, and how much it’ll set you back.

Quick answer: CMHC mortgage insurance (more accurately called mortgage default insurance) is mandatory in Canada whenever your down payment is less than 20% of the home’s purchase price. It protects the lender if you stop making payments — not you. The premium is added to your mortgage balance and ranges from 2.80% to 4.00% of your loan amount depending on how much you put down.

What Is CMHC Mortgage Insurance and How Does It Work?

CMHC mortgage insurance is a type of default insurance that protects your lender — not you — if you were to stop making mortgage payments. It’s provided by the Canada Mortgage and Housing Corporation (a federal Crown corporation), as well as two private insurers: Sagen and Canada Guaranty. Your lender chooses which insurer to use; you typically don’t get a say.

When you take out an insured mortgage, the insurance premium gets added directly to your mortgage balance. You then pay interest on that inflated total over the life of your loan. The premium itself is a percentage of your mortgage amount — not the home’s purchase price — and it increases the less you put down.

One thing worth knowing: in Ontario, Manitoba, and Quebec, you’ll also owe provincial sales tax on the premium at closing. Unlike the premium itself, that tax cannot be rolled into your mortgage — you pay it out of pocket on closing day.

The whole system exists because high-ratio mortgages (those with less than 20% down) carry more risk for lenders. Without this insurance backing them, banks would charge higher interest rates across the board, or refuse to lend to buyers with smaller down payments altogether.

When Is Mortgage Default Insurance Required in Canada?

Mortgage default insurance is required any time your down payment is less than 20% of the purchase price. If you’re putting down 5%, 10%, or 15%, you’re getting an insured mortgage — full stop.

There are also a few other eligibility rules that apply for insured mortgages in Canada:

• The home must be owner-occupied (not a pure investment property)
• The purchase price must be under $1.5 million (as of late 2024, this limit was raised from $1 million)
• The amortization period generally can’t exceed 25 years, though first-time buyers purchasing new construction can qualify for a 30-year amortization

The minimum down payment in Canada scales with the purchase price. For homes priced up to $500,000, the minimum is 5%. For the portion between $500,000 and $999,999, you need 10% on that portion. For homes at $1 million or more, the minimum is 20% — meaning if you’re buying at that price range, you don’t qualify for insured mortgages and need a conventional mortgage regardless.

Quick tip: If you’re close to the 20% threshold, run the numbers carefully. Crossing into conventional territory (20%+ down) eliminates the insurance premium entirely. Depending on your mortgage size, that can be worth more than the extra savings effort.

How Much Does CMHC Insurance Cost in Canada?

The premium is calculated as a percentage of your mortgage amount — and the percentage gets lower as your down payment gets bigger:

• 5% to 9.99% down — 4.00% of the mortgage amount
• 10% to 14.99% down — 3.10% of the mortgage amount
• 15% to 19.99% down — 2.80% of the mortgage amount

As a concrete example: on a $600,000 home with 5% down ($30,000), your mortgage is $570,000. At the 4.00% rate, the CMHC premium is $22,800. That gets added to your mortgage, so you’re actually borrowing $592,800. You then pay interest on that full amount for the life of the loan.

It’s also worth knowing you can’t opt out of the insurance if you meet the conditions — even if your credit score is excellent and your financial situation is rock solid. The requirement is tied to the down payment amount, not your risk profile as a borrower.

Does CMHC Insurance Protect You as the Buyer?

No — and this is the detail that catches a lot of first-time buyers off guard. CMHC mortgage default insurance protects your lender. If you default on your mortgage and the bank has to sell the property at a loss, the insurance covers the lender’s shortfall.

You still owe the money. If the lender makes a claim, CMHC or the private insurer pays out — and can then pursue you for that amount. The insurance doesn’t forgive your debt or protect your credit.

If you want protection as the buyer, you’d be looking at different products: mortgage life insurance, creditor insurance, or disability insurance that continues your payments if you’re unable to work. Those are separate conversations, and they’re worth having — but they have nothing to do with the CMHC premium on your mortgage.

For more on how to build up enough for a down payment and reduce your overall insurance costs, see our guide on how much you need for a down payment on a house in Canada. If you’re using an FHSA or RRSP Home Buyers’ Plan as part of your savings strategy, this breakdown of using both together is worth a read too.

Frequently Asked Questions

Is CMHC insurance the same as home insurance in Canada?

No — they’re completely different products. Home insurance (also called property insurance or homeowner’s insurance) covers your home and belongings against damage, theft, and liability. CMHC mortgage default insurance covers your lender against the risk that you’ll stop making mortgage payments. You need both if you’re buying a home, but they serve entirely different purposes and are paid in completely different ways.

Can you avoid CMHC insurance in Canada?

Yes — by putting at least 20% down. Once your down payment reaches 20% of the purchase price, your mortgage is no longer considered high-ratio and the insurance requirement disappears. You’d then have what’s called a conventional mortgage. Some buyers also avoid it by purchasing a home priced at $1.5 million or more, since insured mortgages aren’t available above that limit anyway.

Does CMHC insurance help you get a better mortgage rate in Canada?

Counterintuitively, yes — insured mortgages often come with slightly lower interest rates than conventional mortgages. Because the lender is protected by the insurance, they take on less risk, and some of that savings gets passed on in the form of a lower rate. The difference is typically small, but it can partially offset the cost of the premium over time, especially early in the mortgage.

Can you get a refund on CMHC insurance if you pay off your mortgage early?

No — once the CMHC premium is added to your mortgage, you don’t get a refund if you pay down the principal faster or pay off the mortgage in full. The premium is a one-time cost calculated at origination. There’s no proration or rebate for early payoff.

Do CMHC premiums apply to mortgage renewals or refinances in Canada?

Generally, no — if your mortgage is already insured and you’re simply renewing with the same or a new lender, you don’t pay the premium again. If you refinance and want to borrow more, or if your home’s value has changed and you’re restructuring your loan in certain ways, the rules get more complex. It’s worth asking your lender or a mortgage broker specifically about your scenario before assuming you’re in the clear.

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