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 Below $1.5 Million: Eligible owner-occupied homes priced below $1.5M can qualify for insured financing with less than 20% down
✓
Specialized refinance programs: CMHC has a specific insured refinance product for eligible secondary-suite construction; ordinary cash-out refinancing follows different lender/equity rules
⚠️ Important: For homes priced at $1.5 million or more, the minimum down payment is 20%, so high-ratio mortgage insurance is not available under the standard insured-purchase rules.
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:
30-year insured mortgages: Eligible first-time home buyers and buyers of newly built homes may qualify for a 30-year insured amortization. CMHC Home Start uses higher premiums than the standard 25-year schedule (for example, 4.20% at 90.01%–95% LTV instead of 4.00%).
| 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:
Mortgage Default Insurance Providers
| Provider | Type | What to know |
|---|
| CMHC | Federal Crown corporation | Publishes mortgage-insurance products, eligibility rules and premium schedules. |
| Sagen | Private insurer | Offers mortgage default insurance through participating lenders. |
| Canada Guaranty | Private insurer | Offers mortgage default insurance through participating lenders. |
Who selects the insurer?
The lender generally decides which insurer to submit the mortgage to. Ask the lender which insurer and product applies and confirm the exact premium and eligibility terms for your application.
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)
- Lower minimum down payment may be available: Eligible insured purchases can proceed with less than 20% down under federal rules
- Access to an insured mortgage: Insurance protects the lender and can expand the set of mortgage products available to an eligible borrower
- Pricing can differ: Lenders may price insured and uninsured mortgages differently; compare the full cost including the insurance premium and applicable taxes
- 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
Eligible participants can withdraw up to $60,000 from RRSPs under the Home Buyers' Plan; two eligible buyers may each be able to use the limit.
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
- Buying sooner is important to your housing plan and you can comfortably afford the insured mortgage
- You have compared the insurance premium and added interest with the cost and time required to reach a 20% down payment
- You have sufficient emergency savings and closing-cost funds after the down payment
- The mortgage remains affordable under your own budget, not only the lender qualification limit
8. Common Questions About CMHC Insurance
What is CMHC insurance and who needs it in Canada? +
CMHC (Canada Mortgage and Housing Corporation) mortgage default insurance is mandatory for any home purchase with a down payment of less than 20% of the purchase price. It protects the lender — not the borrower — if you default on your mortgage. Despite you paying for it, it benefits the lender. Premiums range from 2.8% to 4% of the mortgage amount and are typically added to your mortgage balance.
How much does CMHC insurance cost in Canada? +
CMHC insurance premiums are based on your loan-to-value ratio: 4.00% of the mortgage amount for a 5–9.99% down payment, 3.10% for 10–14.99% down, and 2.80% for 15–19.99% down. For a $500,000 home with 10% down ($50,000), the mortgage is $450,000 and the CMHC premium is $13,950 (3.1%), bringing the total insured mortgage to $463,950. Provincial sales tax on the premium is paid separately at closing.
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 will not require insurance.
Is the CMHC premium tax deductible in Canada? +
No. CMHC insurance premiums are not tax deductible for a primary residence in Canada. They are considered part of your mortgage cost, not an investment expense. If you have a rental property, the situation may differ — consult a tax professional.
Do I pay GST or HST on the CMHC premium? +
Yes. The CMHC premium is subject to applicable provincial sales tax (GST, HST, or PST depending on your province). Unlike the premium itself, this provincial tax cannot be added to your mortgage — it must be paid in cash at closing. Budget for this additional cost when planning your closing expenses.
What credit score do I need to qualify for CMHC insurance? +
For common CMHC homeowner mortgage-insurance products, at least one borrower or guarantor must have a minimum credit score of 600. CMHC also publishes maximum debt-service thresholds of 39% GDS and 44% TDS and uses the greater of the contract rate plus 2% or 5.25% for the qualifying-rate calculation. Additional lender and product conditions apply.
Can I get CMHC insurance for an investment property or second home? +
CMHC has different mortgage-loan-insurance products and eligibility rules. Standard homeowner purchase insurance focuses on owner-occupied properties, but CMHC also has specific products for eligible second homes and small rental properties. Do not assume one set of purchase rules applies to every property type.
What is the difference between CMHC, Sagen, and Canada Guaranty? +
Canada has CMHC and private mortgage default insurers such as Sagen and Canada Guaranty. The lender normally submits an insured mortgage to an insurer it works with. Premium schedules, eligibility, products and underwriting can differ, so use the lender or insurer documentation for the exact mortgage rather than assuming every insurer is identical.
Calculate Your CMHC Premium
Use our mortgage payment calculator to see how CMHC insurance affects your monthly payments.
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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
- CMHC, Sagen and Canada Guaranty provide mortgage default insurance; eligibility and product details should be confirmed with the lender/insurer
- Cannot be cancelled once in place
- Consider your personal situation before deciding if it's worth it
Last reviewed: September 2026