What CMHC default insurance actually is

Canadian mortgage default insurance is a policy that protects the lender if a borrower stops paying. It's not life insurance, not income protection, and it does not pay you anything if you default. It pays the lender after foreclosure if the property sells for less than the loan balance.

The federal Bank Act requires federally regulated lenders (banks, federally chartered trust companies, monoline lenders) to insure any residential mortgage where the loan-to-value (LTV) exceeds 80% — i.e. whenever the down payment is less than 20% of the purchase price.

The default insurer steps in when the lender forecloses and the sale doesn't cover the balance. They reimburse the lender for the shortfall, then pursue you for the deficiency through subrogation. The premium you paid does NOT make your debt go away.

The three Canadian insurers

There are exactly three providers in Canada:

Canada Mortgage and Housing Corporation (CMHC) — federal Crown corporation, the largest insurer, sets the policy baseline that the other two follow.
Sagen (formerly Genworth Canada) — private insurer, identical standard tiers to CMHC, sometimes more flexible on niche programs (newcomer to Canada, BFS).
Canada Guaranty — private insurer, also tier-matched to CMHC.

Standard premium tiers are identical across all three. The difference shows up on programs like:

Newcomer to Canada (under 5 years residency)
Business-for-self / self-employed with non-traditional income docs
Second homes (insurable but with surcharges)
Properties over $1M (only CMHC, with restrictions)

Your broker picks the insurer based on which one will say yes to your specific file at the best price.

How the premium scales by LTV

Premium tiers as of 2026:

| LTV (down payment) | Premium % of mortgage | |---|---| | 65% or less (35%+ down) | 0% — uninsured | | 65.01% to 75% (25-34.99% down) | 0.60% | | 75.01% to 80% (20-24.99% down) | 1.70% | | 80.01% to 85% (15-19.99% down) | 2.40% | | 85.01% to 90% (10-14.99% down) | 2.80% | | 90.01% to 95% (5-9.99% down) | 3.10% | | Maximum 95% LTV (5% down minimum) | 4.00% |

Worked example — $620,000 purchase with 10% down:

Mortgage: $558,000
LTV: 90%
Premium tier: 2.80%
Premium: $15,624
New mortgage with premium added: $573,624

How the premium is paid

The premium is added to your mortgage principal and amortized over the full mortgage term. You don't write a cheque for it at closing — it just bumps your total mortgage up. Your monthly payment is calculated on the larger balance.

PST on the premium — three provinces

Ontario, Quebec, and Saskatchewan charge provincial sales tax on the insurance premium itself. This part you DO pay at closing in cash — it's not financed.

| Province | PST rate on premium | |---|---| | Ontario | 8% | | Quebec | 9.975% (QST) | | Saskatchewan | 6% |

On the $15,624 premium above, an Ontario borrower owes an additional $1,250 at closing.

Budget for PST as part of your closing-cost float. It catches a lot of first-time buyers off-guard because the rest of the premium is invisible (rolled into the mortgage).

The federal minimum down payment tiers

You can't just put 5% down on any home. The federal rule is tiered by price:

First $500,000: 5% down minimum
$500,001 to $1,499,999: 10% on the portion above $500k
$1.5M and above: 20% down minimum (uninsured only — no CMHC available)

Worked example — $750,000 home:

5% on first $500k = $25,000
10% on next $250k = $25,000
Total minimum down: $50,000 (6.67% effective)

When CMHC is mandatory vs optional

Insured mortgages (must have CMHC or equivalent)

Down payment under 20% on a primary residence purchase
Federally regulated lender
Purchase price under $1.5M
Standard amortization (insured 25-year, or 30-year for first-time new-build buyers)

Insurable mortgages (don't HAVE to be insured but qualify)

20%+ down, but still meets all CMHC standards
Lenders sometimes "back-insure" these to securitize them — passes a small cost to you in exchange for a slightly better rate

Uninsured (cannot or chose not to insure)

20%+ down + non-standard (rental, refinance, alt-A income)
Over $1.5M
30+ year amortization on a non-FTB purchase

Uninsured mortgages typically price 20-50 bps higher than insured because the lender absorbs all the credit risk.

The 30-year amortization for new builds

Since August 2024, first-time buyers buying a newly constructed home can take a 30-year insured amortization (vs the standard 25). It's only available on insured mortgages — meaning you need to qualify under CMHC, Sagen, or Canada Guaranty's rules. Resale homes are excluded.

The trade-off: lower monthly payment, but ~$130,000 more interest over the life of the mortgage at typical rates. See our 30-year amortization for new builds guide.

When putting more down to avoid CMHC makes sense

Sometimes it's smart to stretch to 20% down to avoid the premium entirely. Sometimes it's smart to stay at 10% and invest the difference. The right answer depends on:

Your cash position after closing — if 20% drains your emergency fund, stay lower.
Investment opportunity cost — if you'd otherwise put the cash into a TFSA at 6%+ expected return, the premium is cheap "leverage."
Time horizon — short-term holders amortize the premium over fewer years and effectively pay more.
Provincial PST hit — in ON/QC/SK, the PST is real cash out at closing.

Worked comparison

A $700,000 purchase, comparing 10% down ($70k) vs 20% down ($140k):

10% down: $630k mortgage + $17,640 premium = $647,640 mortgage; closing PST in Ontario adds $1,411
20% down: $560k mortgage, no premium, no PST
Cash freed up by going to 10% down: $70,000 invested at 6% over 5 years grows to ~$93,700
Cost of the premium over 5 years (interest at 5%): ~$22,400 paid in interest charges + $1,411 PST = ~$23,800

In a 6% TFSA-return scenario over 5 years, 10% down wins by roughly $4,000. Past 5 years the math tilts further toward 10% down if your investments outperform your mortgage rate.

Common questions

Does CMHC insurance pay if I lose my job?

No. CMHC default insurance protects the lender. You may want separate mortgage protection insurance, disability insurance, or critical-illness insurance — those are unrelated products.

Can I cancel CMHC insurance later?

No. Once the premium is paid into the mortgage, it's done. The insurance lasts the life of the loan. If you refinance into an uninsured product later, the new mortgage isn't insured, but you don't get a premium refund.

Can a private lender skip CMHC?

Private lenders (provincially licensed, not federally regulated) are not subject to the Bank Act's CMHC requirement. They typically lend at higher LTVs without insurance — at substantially higher rates and fees to compensate for the risk.

What if I want to put 5% down on a $1.2M home?

You can't. The federal tier rule requires 10% on the portion above $500k. On $1.2M, the minimum down is $25k + $70k = $95,000.

Is the premium the only fee?

For most provinces, yes. ON/QC/SK add PST on the premium. CMHC may apply small underwriting surcharges on niche programs (vacation home, BFS, second home).

Bottom line

CMHC default insurance is the cost of admission to Canadian home ownership with less than 20% down. The premium is real but the math often favours putting less down and keeping cash invested — especially for younger buyers with long time horizons.

Run your exact numbers on our down payment + CMHC calculator and the affordability calculator to see your full insured-vs-uninsured comparison.

CMHC mortgage default insurance — what it is, what it costs, and when you need it