CMHC Mortgage Insurance in Canada: When You Need It and What It Costs

Key Takeaway: CMHC mortgage default insurance is required in Canada when you buy a home with less than 20 per cent down. The insurance protects the lender if you default, and the premium (which ranges from 0.6 per cent to 4.0 per cent of your mortgage amount) is added to your loan balance. You pay for it, but it allows you to enter the housing market sooner with a smaller down payment.

Introduction

CMHC mortgage insurance can be one of the largest upfront costs for Canadian home buyers, yet many people misunderstand what it is and how it works. According to the Canada Mortgage and Housing Corporation, mortgage default insurance makes home ownership accessible to buyers who have saved less than a 20 per cent down payment (CMHC, 2026). This article breaks down exactly when you need CMHC insurance, what you will pay, and how the system works in Canada.

1. What CMHC Mortgage Insurance Actually Is

CMHC mortgage default insurance is not home insurance or mortgage life insurance. It protects the lender, not you, if you stop making mortgage payments. When your down payment is less than 20 per cent of the purchase price, Canadian lenders are required by law to insure the mortgage. CMHC, a Crown corporation, is the largest provider of this insurance in Canada, although private insurers Sagen and Canada Guaranty offer identical coverage under the same federal rules.

2. When CMHC Insurance Is Required (The 20 Per Cent Rule)

You must buy mortgage default insurance if your down payment is less than 20 per cent of the home’s purchase price, which means your loan-to-value ratio is above 80 per cent. For example, if you buy a home for C$500,000 with a C$50,000 down payment (10 per cent), you need CMHC insurance on the C$450,000 mortgage. If you put down C$100,000 or more (20 per cent), the mortgage is considered conventional and no insurance is required.

The Financial Consumer Agency of Canada notes that all federally regulated lenders must follow this rule, and most provincial lenders do as well (FCAC, 2026).

3. What CMHC Insurance Costs (Premium Rates by Down Payment)

CMHC premiums are calculated as a percentage of your mortgage amount, not the purchase price. The rate depends on how much you put down. As of July 2026, CMHC premium rates are:

5.00 per cent to 9.99 per cent down: 4.00 per cent premium
10.00 per cent to 14.99 per cent down: 3.10 per cent premium
15.00 per cent to 19.99 per cent down: 2.80 per cent premium
20.00 per cent or more down: no insurance required

For a C$450,000 mortgage with 10 per cent down, the premium is C$13,950 (3.10 per cent of C$450,000). This amount is added to your mortgage balance, so you finance it over the life of the loan rather than paying it upfront in cash.

4. How to Calculate Your CMHC Premium

Take your mortgage amount (purchase price minus down payment), multiply it by the premium rate for your down payment tier, and add the result to your mortgage principal. You also pay provincial sales tax on the premium in most provinces, which is due at closing as a cash cost.

Example: C$500,000 home, C$50,000 down (10 per cent):

Mortgage amount: C$450,000
Premium rate: 3.10 per cent
Premium: C$13,950
Total mortgage with insurance: C$463,950
Plus provincial sales tax on the premium (varies by province, paid at closing)

5. CMHC Versus Sagen and Canada Guaranty

CMHC is not your only option. Sagen (formerly Genworth Canada) and Canada Guaranty are private mortgage insurers that offer the same coverage at identical premium rates. All three insurers follow the same federal rules set by the Office of the Superintendent of Financial Institutions, including the mortgage stress test. Your lender typically chooses which insurer to use, though you can ask. The coverage, cost, and qualification rules are the same regardless of which insurer is selected.

6. How to Avoid Paying CMHC Insurance

The only way to avoid mortgage default insurance is to put down 20 per cent or more. Some buyers combine a first mortgage at 80 per cent loan-to-value with a second mortgage or home equity line of credit to reach the 20 per cent threshold, but this strategy carries higher interest costs on the second loan and may not save money overall. Another option is to wait and save a larger down payment, though rising home prices in many Canadian markets can offset the savings from avoiding the insurance premium.

7. Can You Cancel or Get a Refund on CMHC Insurance?

No. Once CMHC insurance is added to your mortgage, it stays in place for the life of that loan, even after your equity exceeds 20 per cent. You cannot cancel it or receive a refund. If you refinance with a new lender after reaching 20 per cent equity, the new mortgage will be conventional and will not require insurance, but the original premium remains part of your old loan balance until it is paid off or discharged.

Frequently Asked Questions

Does CMHC insurance protect me if I lose my job?
No. CMHC mortgage default insurance protects the lender, not you. If you want coverage for yourself in case of job loss, disability, or death, you need separate mortgage life insurance or creditor insurance, which is optional.

Can I pay the CMHC premium in cash instead of adding it to my mortgage?
Yes. You have the option to pay the premium upfront at closing, though most buyers choose to add it to the mortgage and finance it over the amortization period. Paying in cash saves interest over the life of the loan.

Do I need CMHC insurance if I am buying a second home or investment property?
CMHC insurance is available only for owner-occupied properties. If you are buying a rental property or second home with less than 20 per cent down, you must use a private insurer (Sagen or Canada Guaranty) under their non-owner-occupied programs, which have higher premium rates.

Does the premium change based on my credit score?
No. CMHC premium rates are based solely on your down payment percentage, not your credit score, income, or property location. However, you must still meet the lender’s qualification criteria and pass the OSFI mortgage stress test to be approved.

What happens if I sell my home before the mortgage is paid off?
The insurance stays with the mortgage. When you sell, the mortgage is discharged and the remaining balance (including the financed insurance premium) is paid off from the sale proceeds. You do not get a refund on the unused portion of the premium.

Conclusion

CMHC mortgage insurance is a required cost for Canadian home buyers with less than 20 per cent down, but it opens the door to home ownership years earlier than saving a full 20 per cent would allow. Understanding how the premium is calculated and how it affects your total mortgage cost helps you budget accurately and make an informed decision. Before you commit, use a CMHC calculator to see your exact premium, and speak with a licensed mortgage broker to confirm current rates and qualification rules for your situation.

Disclaimer: This article provides general educational information about CMHC mortgage default insurance in Canada and is not personalized financial, lending, or legal advice. Mortgage insurance rules, premium rates, and qualification requirements vary by lender, insurer, and province, and are subject to change. The premium rates shown are as of July 2026; verify current rates with CMHC, Sagen, Canada Guaranty, or a licensed mortgage professional before making any decisions. This is not an offer or commitment to lend. For advice specific to your financial situation, consult a licensed mortgage broker or financial adviser.