Mortgage Default Insurance (CMHC) in Canada: What It Costs and How to Avoid It
By Jordan Ellis · Published · Reviewed
Quick Answer
Mortgage default insurance (often called CMHC insurance) is mandatory in Canada when your down payment is under 20%. The premium runs 2.8%–4.0% of the mortgage amount and is added to your loan balance — on a $500,000 home with 10% down, that's $13,950 added to a $450,000 mortgage, costing about $86/month inside your payment for 25 years.
What it is and when it’s mandatory
In Canada, any mortgage with less than 20% down must be insured against default — it’s a federal requirement for federally regulated lenders, not a lender upsell. The insurance goes by “CMHC insurance” colloquially, though Sagen and Canada Guaranty sell the same product at the same rates. The premium tiers (as a percentage of the mortgage amount):
| Down payment | Premium |
|---|---|
| 5% – 9.99% | 4.0% |
| 10% – 14.99% | 3.1% |
| 15% – 19.99% | 2.8% |
| 20%+ | Not required |
What it costs in practice
A $500,000 home with 10% down ($50,000):
- Base mortgage: $450,000
- Premium (3.1%): $13,950, added to the mortgage → $463,950 borrowed
- At 5% over 25 years, that premium alone adds about $86/month to the payment and roughly $10,800 in extra interest over the full amortization
So the “$13,950 fee” really costs closer to $24,000 by the time it’s paid off. The mortgage calculator applies the correct tier automatically and shows the premium as its own line item.
How to avoid or minimize it
- Put 20% down. The clean escape — no premium, and a 30-year amortization is open to you (insured mortgages are capped at 25 years unless you’re a first-time buyer or buying a new build).
- Get closer to a lower tier. Moving from 9.5% down to 10% down drops the premium from 4.0% to 3.1% — on $450,000 that’s $4,050 saved for finding another ~$2,300 of down payment.
- Buy less house. At 5% down on $400,000 the premium is $15,200; at $350,000 it’s $13,300. The premium scales with the loan.
- First-time buyer programs. The First Home Savings Account (FHSA) lets you save up to $40,000 toward a down payment tax-free — reaching 20% faster is the real prize.
What doesn’t work
- Paying it off faster doesn’t remove it. The premium is in the principal; extra payments just retire it sooner along with the rest of the loan.
- Switching lenders doesn’t remove it. Insured mortgages stay insured (which is actually good news at renewal — insured borrowers often get better rates, since the lender’s risk is covered).
- Waiting for 20% equity doesn’t trigger cancellation. That’s the American PMI rule; it doesn’t exist here.
The bottom line
CMHC insurance is the toll for buying with under 20% down — sometimes worth paying to stop renting years earlier, but never free. Know your tier, know the real cost with interest, and run both scenarios in the mortgage calculator before deciding how much to put down.
Official sources
Rules and dollar limits change. Confirm current amounts with the official pages below before you act · Last reviewed .
- Mortgage loan insurance cost (CMHC)