1. What is CMHC Insurance?
CMHC (Canada Mortgage and Housing Corporation) insurance, also known as mortgage default insurance or mortgage loan insurance, is a type of insurance that protects lenders if you default on your mortgage. Despite the name, it's not insurance for you – it protects the lender, but you pay for it.
Key Facts About CMHC Insurance
- Required by law when your down payment is less than 20%
- One-time premium added to your mortgage amount
- Protects the lender, not you, despite you paying for it
- Allows you to buy with as little as 5% down
- Can be paid upfront or added to your mortgage
2. Who Needs CMHC Insurance?
CMHC insurance is mandatory in the following situations:
✓ You Need CMHC Insurance If:
✓
Down Payment Less Than 20%: Any down payment between 5% and 19.99% requires mortgage default insurance
✓
Buying Under $1 Million: Homes priced under $1M can qualify with less than 20% down
✓
Refinancing with <80% Equity: Some refinance situations may require insurance
⚠️ Important: If you're buying a home over $1 million, you cannot get CMHC insurance. You must have a minimum 20% down payment. This is a federal regulation.
3. How Much Does CMHC Insurance Cost?
The premium is calculated as a percentage of your mortgage amount (not the home price). The rate depends on how much you put down:
| Down Payment |
Insurance Premium |
Example on $400,000 Mortgage |
| 5.00% - 9.99% |
4.00% |
$16,000 |
| 10.00% - 14.99% |
3.10% |
$12,400 |
| 15.00% - 19.99% |
2.80% |
$11,200 |
| 20% or more |
0% |
$0 (No insurance required) |
Real Example
$500,000
Home Price
$50,000
Down Payment (10%)
$450,000
Mortgage Amount
$13,950
CMHC Premium (3.1%)
Total Mortgage: $450,000 + $13,950 = $463,950
💰 How the Premium is Paid
You have two options:
- Add to Mortgage (Most Common): The premium is added to your mortgage amount and paid off over your amortization period
- Pay Upfront: Pay the full premium at closing (rare, as most people don't have extra cash)
Note: If you add it to your mortgage, you'll pay interest on the premium amount over the life of your mortgage.
4. How Does CMHC Insurance Work?
The Process
📝 Step-by-Step Process
1️⃣
Apply for Mortgage
When you apply for a mortgage with less than 20% down, your lender automatically includes CMHC insurance in the application.
2️⃣
CMHC Reviews Application
CMHC reviews your application to ensure you meet their lending criteria (credit score, income, debt ratios, etc.).
3️⃣
Premium Calculated
The premium is calculated based on your loan-to-value ratio (LTV) and added to your mortgage.
4️⃣
Approval & Closing
Once approved, the insurance is in place and you close on your home. The premium is part of your total mortgage.
What Does It Cover?
CMHC insurance covers the lender for:
- Losses if you default on your mortgage
- Unpaid principal after foreclosure and home sale
- Legal costs associated with foreclosure
Important: CMHC insurance does NOT protect you. If you default:
- You still lose your home
- Your credit score is damaged
- CMHC can sue you for any remaining balance after they pay the lender
5. CMHC Alternatives
CMHC isn't the only mortgage default insurer in Canada. There are two private alternatives:
The Three Providers
| Provider |
Type |
Market Share |
Premium Rates |
CMHC
(Canada Mortgage and Housing Corporation) |
Federal Crown Corporation |
~50% |
Same for all three |
Sagen
(formerly Genworth Canada) |
Private Company |
~30% |
Same for all three |
| Canada Guaranty |
Private Company |
~20% |
Same for all three |
Which One Should You Choose?
You typically don't choose. Your lender selects which insurer to use based on their relationships and approval rates. The premium rates are identical across all three providers, so it doesn't matter which one insures your mortgage.
6. Pros and Cons of CMHC Insurance
✅ Advantages
- Buy with Less Money Down: Only need 5% down instead of 20% ($25,000 vs $100,000 on a $500,000 home)
- Get Into Market Sooner: Don't have to wait years to save 20%
- Build Equity Faster: Your home may appreciate while you're paying it off
- Better Interest Rates: Insured mortgages often get better rates than uninsured ones
- Government Backing: CMHC is backed by the federal government
❌ Disadvantages
- Higher Total Cost: Premium adds thousands to your mortgage
- Pay Interest on Premium: If added to mortgage, you pay interest on it for 25 years
- Doesn't Protect You: Only protects the lender, despite you paying
- Higher Monthly Payments: Larger mortgage means higher monthly payments
- Less Equity Initially: Starting with less equity means less financial cushion
7. How to Avoid CMHC Insurance
If you want to avoid paying CMHC insurance premiums, here are your options:
Ways to Avoid CMHC Insurance
1️⃣
Save 20% Down Payment
The most straightforward way – save until you have 20% of the purchase price.
Example: For a $500,000 home, save $100,000
2️⃣
Get a Gift from Family
Many first-time buyers receive down payment gifts from parents or family. Must be documented as a gift (not a loan).
3️⃣
Use RRSP Home Buyers' Plan
Borrow up to $35,000 from your RRSP tax-free ($70,000 for couples) to boost your down payment to 20%.
4️⃣
Buy a Less Expensive Home
If you can't save 20% on your dream home, consider a starter home where 20% is more achievable.
5️⃣
Piggyback Mortgage (Less Common)
Some lenders offer a second mortgage to help you reach 20%, though this is rare and comes with higher rates.
Is It Worth Avoiding?
Not always. Consider:
🤔 When CMHC Insurance Might Be Worth It
- You're in a rapidly appreciating market (waiting to save could cost more)
- Rent is similar to what mortgage payments would be
- You have stable income and expect it to grow
- You're young and time in the market works in your favor
- Interest rates are currently low
8. Common Questions About CMHC Insurance
Can I cancel CMHC insurance once I reach 20% equity?
+
No. CMHC insurance cannot be cancelled or removed from your mortgage. It stays for the life of that mortgage, even if you reach 20% equity through payments or home appreciation. However, if you refinance with 20%+ equity, the new mortgage won't require insurance.
Is the CMHC premium tax deductible?
+
No. CMHC insurance premiums are not tax deductible for a primary residence in Canada. They're considered part of your mortgage cost, not an investment expense.
Do I pay GST/HST on the CMHC premium?
+
Yes. The CMHC premium is subject to applicable provincial sales tax (GST/HST/PST depending on your province). This tax is also added to your mortgage if you don't pay the premium upfront.
What credit score do I need for CMHC insurance?
+
Minimum 600 credit score, but 680+ is recommended for better approval chances. CMHC has strict lending criteria including debt service ratios (GDS ≤ 39%, TDS ≤ 44%) and the mortgage stress test.
Can I get CMHC insurance for investment properties?
+
No. CMHC insurance is only available for owner-occupied properties. Investment properties, second homes, and vacation properties require a minimum 20% down payment.
How long does it take to get CMHC approval?
+
Typically 24-48 hours. Your lender submits your application to CMHC (or Sagen/Canada Guaranty) and receives approval electronically. This is part of your overall mortgage approval process.
Calculate Your CMHC Premium
Use our mortgage payment calculator to see how CMHC insurance affects your monthly payments.
Calculate Now →
Final Thoughts
CMHC insurance enables millions of Canadians to become homeowners with smaller down payments. While it adds to your total mortgage cost, it opens the door to homeownership years earlier than saving 20% would allow.
✓ Key Takeaways:
- CMHC insurance is required if your down payment is less than 20%
- Premium ranges from 2.8% to 4.0% of your mortgage amount
- It protects the lender, not you
- Three providers exist: CMHC, Sagen, and Canada Guaranty (same rates)
- Cannot be cancelled once in place
- Consider your personal situation before deciding if it's worth it
Last Updated: May 2026