Mortgages: What is CMHC insurance in Canada?
Loading article…
This insurance is actually called mortgage loan insurance, although it is often referred to as “CMHC insurance”. This is an essential expense in Canada for all homebuyers with a down payment of less than 20% of the total purchase price of the property. CMHC’s role is to protect lenders if you stop making your payments, causing you to default on your loan agreement. The premium is most often added to the loan amount and repaid with your mortgage payments from the beginning of yourmortgage term. The amount of mortgage defaultinsurance you require may vary depending on the amount of down payment you have made on your property. It ranges from 2.8% to 4% (or 0% if you put 20% or more down). Although it may seem like a lot of money, it serves a purpose. Because it gives lenders additional protection, they are more likely to lend to borrowers with smaller down payments, which can benefit Canadians who might not otherwise have the funds to purchase their homes. This means that lenders do not charge higher interest rates to reflect the higher level of risk they are taking on, as the risk is shifted from the lender to the mortgage insurance company.
How do I calculate mortgage default insurance?
To calculate your mortgage default insurance, you must first determine the level of the down payment you will be making. This percentage can range from 5% to 20%, and the level of mortgage insurance decreases as the down payment increases (CMHC premiums are calculated on the loan amount, plus a 0.20% surcharge if the amortization exceeds 25 years; rates checked on the CMHC website on October 7, 2026):
- 5% to 9.99% down payment = 4.00% premium on the loan
- 10% to 14.99% down payment = 3.10% premium on the loan
- 15% to 19.99% down payment = 2.80% premium on the loan
- 20% or more down payment = no mandatory insurance (0%)
Based on the above, it is clear that if you want to minimize your monthly payments significantly, it is essential to try to make a down payment of at least 20% when applying for your mortgage. As you will see in the next point, the monthly cost can be greatly affected by simply increasing your down payment by 5%.
How do I pay for mortgage insurance?
The mortgage loan insurance premium can be paid in full at the time of purchase, but it is most often added to your mortgage amount and paid off with your mortgage payments during the amortization period of your mortgage. For example, let’s say you buy a property for $500,000 with a 10% down payment. This means you will borrow $450,000 and have to pay a 3.10% premium on that loan, which equals $13,950. This means that your mortgage will be based on $450,000 + $13,950 = $463,950 in total. This is the total amount you will need to borrow from the lender of your choice when you purchase your home. Note: in Quebec, Ontario and Saskatchewan, provincial sales tax applies to the premium and cannot be added to the loan, so it must be paid out of pocket (according to the CMHC website, checked on October 26, 2026).
Mortgage default insurance providers
There are three main providers of mortgage default insurance in Canada. The only public insurer is Canada Mortgage and Housing Corporation (CMHC). Here are the three:
When you shop for mortgage insurance, these are the entities from which you will obtain it.
Tips for reducing your mortgage insurance
The only real way to reduce the amount you pay each month on top of your base mortgage with the addition of mortgage default insurance is to increase the down payment you make on your property. You’ll have two advantages, because with a larger down payment, you’ll need to borrow less, so your overall monthly payments will be lower. Those looking to reduce their monthly expenses will be at a great advantage. Overall, you have two options. You can either find a property with a lower purchase price (which will allow you to make a larger down payment), or you can save more to increase your down payment. You can also turn to family members who may be willing to lend you additional funds to get you closer to that magic 20% down payment level. These are the main reasons why it is essential to plan your strategy when buying a property.
