CMHC Insurance Calculator

Understanding Mortgage Default Insurance in Canada

When Canadians purchase a home with less than 20% down payment, they must pay mortgage default insurance. Despite often being called "CMHC insurance" after Canada Mortgage and Housing Corporation, this insurance protects the lender, not the borrower. If you default on your mortgage, the insurer pays the lender. You pay the premium but receive no direct benefit beyond the ability to purchase with a smaller down payment.

This requirement exists because high-ratio mortgages (those with less than 20% down) carry more risk for lenders. The insurance transfers that risk to the insurer, making lenders willing to offer mortgages to buyers who haven't yet accumulated a full 20% down payment.

Understanding how mortgage insurance works helps you make informed decisions about your down payment strategy and budget accurately for the true cost of homeownership.

Who Provides Mortgage Insurance

Three companies offer mortgage default insurance in Canada:

• CMHC (Canada Mortgage and Housing Corporation) - The federal Crown corporation and largest provider
• Sagen (formerly Genworth Canada) - A private insurer
• Canada Guaranty - Another private alternative

All three use the same premium rate structure. Your lender chooses which insurer to use, not you, and the rates and rules are effectively identical regardless of provider.

Premium Rates by Down Payment

Mortgage insurance premiums are calculated as a percentage of your mortgage amount (not the home price). The rate depends on your loan-to-value (LTV) ratio:

For example, on a $500,000 home with 10% down ($50,000), you finance $450,000. At the 3.10% premium rate, your mortgage insurance costs $13,950.

How Premiums Are Paid

The premium is based on your mortgage amount (purchase price minus down payment), not the total home price. This calculation determines the one-time premium you'll pay.

Unlike some insurance requiring upfront payment, mortgage default insurance premiums are added to your mortgage principal. You don't pay $13,950 at closing. Instead, your mortgage becomes $463,950, and you pay off the premium through your regular mortgage payments over the amortization period.

This approach makes homeownership more accessible but increases your monthly payment and total interest paid over the life of the mortgage.

Maximum Insurable Property Price

Mortgage default insurance is only available for properties priced at $1,000,000 or less. If you're purchasing a more expensive home, you must provide at least 20% down payment regardless of your financial qualifications.

This limit applies to the purchase price, not the appraised value. Properties above this threshold simply don't qualify for insured mortgages in Canada.

Minimum Down Payment Requirements

Canada has specific minimum down payment rules based on purchase price:

• Homes up to $500,000: Minimum 5% down payment
• Homes from $500,001 to $999,999: 5% on the first $500,000 plus 10% on the portion above $500,000
• Homes $1,000,000 or more: Minimum 20% down payment (no insurance available)

For a $750,000 home, the minimum down payment would be 5% of $500,000 ($25,000) plus 10% of $250,000 ($25,000), totalling $50,000 (6.67% of purchase price).

Self-Employed Borrower Considerations

Self-employed Canadians face additional scrutiny when applying for insured mortgages. Lenders and insurers typically require two or more years of business history, business financial statements, Notice of Assessment from CRA, and proof of consistent income.

Some self-employed borrowers who cannot document traditional income may qualify for stated-income programs, but these often require larger down payments or may not be eligible for default insurance.

Portability: Transferring Your Insurance

Mortgage default insurance can be portable, meaning you may transfer your existing coverage to a new property when you sell and purchase again. This can save thousands in premiums on your next home.

Portability requires the new mortgage be with a lender approved by the same insurer, the loan-to-value ratio cannot exceed the original ratio, and there must be continuous coverage without gaps. Ask your lender about portability options before assuming you'll need to pay insurance premiums again.

Rental Property Rules

Mortgage default insurance is designed for owner-occupied properties. For rental and investment properties, down payments of 20% or more are typically required. Some insured rental programs exist but with stricter criteria and different qualification requirements.

If you're purchasing a property you don't intend to live in, expect to need a conventional (uninsured) mortgage with at least 20% down.

Provincial Sales Tax on Premiums

Some provinces charge PST on mortgage insurance premiums, adding to your costs:

• Ontario: 8% PST on the premium
• Quebec: 9% QST on the premium
• Saskatchewan: 6% PST on the premium
• Manitoba: 7% PST on the premium (for properties outside Winnipeg)

On a $13,950 premium in Ontario, you'd pay an additional $1,116 in PST. This tax is typically added to your mortgage along with the premium itself.

Impact on Monthly Payments

Adding the insurance premium to your mortgage increases your monthly payment in two ways: you're borrowing more principal, and you pay interest on that additional amount over the entire amortization period.

On a $450,000 mortgage at 5% over 25 years, the monthly payment is approximately $2,628. Adding a $13,950 premium makes the mortgage $463,950, increasing the payment to approximately $2,710. That's $82 more per month, totalling nearly $25,000 in extra payments over 25 years when you include interest on the premium.

Is Mortgage Insurance Worth It?

Mortgage default insurance isn't optional if you want to buy with less than 20% down. The real question is whether buying sooner with insurance or waiting to save 20% makes more financial sense.

Buying with insurance lets you enter the housing market sooner, potentially benefiting from price appreciation. You start building equity instead of paying rent and lock in today's prices rather than chasing rising markets.

Waiting means avoiding thousands in insurance premiums, enjoying lower monthly payments with a larger down payment, and building more equity cushion against market downturns. The right answer depends on your local market, savings rate, rent costs, and personal circumstances.

Ways to Avoid CMHC Insurance

If you want to avoid mortgage insurance premiums, your options include:

• Save 20% down payment: The most straightforward approach, though it takes longer in expensive markets
• Gifted down payment: Family gifts can help reach the 20% threshold
• Credit union mortgages: Some credit unions offer uninsured mortgages with less than 20% down, though rates may be higher

Weigh the cost of insurance against the opportunity cost of delayed homeownership when making your decision.

---

Mortgage default insurance enables Canadians to purchase homes without saving a full 20% down payment, but it comes at a cost that extends over your entire mortgage term. Understanding the premium rates, payment structure, and alternatives helps you make an informed decision about whether to buy now with insurance or save longer to avoid it. This calculator shows you exactly what that insurance will cost so you can budget accordingly and choose the path that best fits your financial situation.