Understand Home Loans Mortgage Insurance
Discover when home loans mortgage insurance is mandatory in Canada and how your broker helps navigate these premiums.
When you’re buying a home in Canada with less than 20% down, home loans mortgage insurance becomes a required part of your purchase. This insurance protects your lender if you default on payments, not you as the borrower.
With less than 20% down, the premium ranges from 2.80% to 4.00% of your mortgage amount (0.20% more with a 30-year amortization; the lower rates, from 0.60%, apply only when a loan with 20% or more down is insured) and gets added to your total loan balance. Three providers dominate the Canadian market: CMHC, Sagen, and Canada Guaranty.
Recent regulatory changes effective December 2024 raised the insured mortgage price cap to $1.5 million and made 30-year amortizations available to all first-time buyers and to all buyers of a newly built home. If you’re planning to purchase a home, compare your options with our credit card comparison tool to maximize rewards on closing costs.
What Is Mortgage Insurance
Mortgage default insurance (also called mortgage loan insurance) allows you to purchase a home with a down payment below 20% of the property value. The insurance protects federally regulated lenders against losses if you cannot make your mortgage payments.
This protection enables financial institutions to offer mortgages to buyers who haven’t saved a full 20% down payment. Without this insurance, most lenders would require you to provide at least 20% equity upfront.
The premium is calculated as a percentage of your mortgage amount and depends on your loan-to-value ratio. You can pay this premium upfront in a lump sum or add it to your mortgage balance and pay it over time with interest.
When Insurance Is Required
Canadian regulations require mortgage insurance whenever your down payment is less than 20% of the purchase price. This threshold applies to all residential properties eligible for insured mortgages across the country.
The minimum down payment structure in Canada follows a tiered system based on property value. For homes priced at $500,000 or less, you need a minimum 5% down payment.
For properties between $500,000 and $1,499,999, you must provide 5% on the first $500,000 plus 10% on the remaining amount. Properties valued at $1.5 million or more cannot use mortgage insurance and require a minimum 20% down payment.
| Purchase Price | Minimum Down Payment | Calculation Example | Insurance Required |
|---|---|---|---|
| $400,000 | 5% | $20,000 | Yes |
| $600,000 | 5% + 10% | $35,000 | Yes |
| $750,000 | 5% + 10% | $50,000 | Yes |
| $1,500,000 | 20% | $300,000 | No |
Even if you have saved 20% or more, some lenders may still require mortgage insurance if you are self-employed or have a limited credit history. Rates and terms may vary by financial institution.
Canadian Insurance Providers
Three organizations provide mortgage default insurance in Canada. Your lender typically selects which provider to use during your mortgage approval process, though all three follow similar premium structures set by federal regulations.
CMHC Insurance
Canada Mortgage and Housing Corporation is a federal Crown corporation and the largest mortgage insurer in the country. CMHC has provided mortgage insurance since 1954 and sets many of the industry standards that private insurers follow.
CMHC offers standard mortgage insurance for purchases and recently expanded coverage for refinances used to finance secondary suite construction. These refinances are eligible for properties valued up to $2 million at a maximum 90% loan-to-value ratio.
Private Insurers
Sagen (formerly Genworth Financial Canada) and Canada Guaranty Mortgage Insurance Company operate as approved private mortgage insurers. Both companies offer products comparable to CMHC with similar premium rates and eligibility requirements.
For a home purchase, the three insurers charge comparable premiums based on your loan-to-value ratio. MLI Select, sometimes cited in this context, is a CMHC product for multi-unit rental properties, not a homebuyer product.
- CMHC: Federal Crown corporation, largest market share, sets industry standards
- Sagen: Private insurer, formerly Genworth Canada, comparable products and rates to CMHC
- Canada Guaranty: Private insurer, comparable products and rates to CMHC
Premium Rates And Costs
Mortgage insurance premiums are calculated by multiplying your mortgage amount by a percentage rate. This rate depends on your loan-to-value ratio, which you calculate by dividing the amount you’re borrowing by the property value.
The higher your LTV ratio (meaning a smaller down payment), the higher your premium percentage. With less than 20% down, CMHC's standard rates range from 2.80% for a down payment of 15% to 19.99% to 4.00% for the minimum 5% down. The lowest rate, 0.60%, applies only to loans at 65% loan-to-value or less.
| Down Payment | LTV Ratio | Premium Rate |
|---|---|---|
| 5% to 9.99% | 90.01% to 95% | 4.00% |
| 10% to 14.99% | 85.01% to 90% | 3.10% |
| 15% to 19.99% | 80.01% to 85% | 2.80% |
| 20% or more | 80% or less | None required |
Eligible buyers who choose a 30-year amortization (first-time buyers, or anyone buying a newly built home) pay an additional 0.20% on their premium. Some provinces also charge provincial sales tax on the insurance premium, which must be paid upfront at closing.
Real Cost Examples
For a $450,000 home purchase with a 5% down payment ($22,500), you would borrow $427,500. At a 95% LTV ratio, the premium is 4.00%, which equals $17,100.
This premium gets added to your mortgage balance, bringing your total loan to $444,600. Over a 25-year amortization, you’ll pay interest on this premium amount as well.
If you increased your down payment to 10% ($45,000), you would borrow $405,000 at a 90% LTV ratio. The premium drops to 3.10%, equalling $12,555—a savings of $4,545 compared to the 5% scenario.
How To Avoid The Premium
The only guaranteed way to avoid mortgage insurance is to provide a down payment of 20% or more of the purchase price. This eliminates the insurance requirement entirely and saves you thousands in premium costs.
Several Canadian programmes can help you reach the 20% threshold faster. The Home Buyers’ Plan lets you withdraw up to $60,000 from your RRSP tax-free to purchase your first home.
The First Home Savings Account allows eligible Canadians to save up to $40,000 tax-free specifically for a first home purchase. You could combine both programmes to access up to $100,000 per person toward your down payment.
- Save 20% down payment: Completely eliminates mortgage insurance requirement and premium costs
- Use Home Buyers’ Plan: Withdraw up to $60,000 from RRSP tax-free for first home purchase
- Maximize FHSA contributions: Save up to $40,000 tax-free in First Home Savings Account
- Combine programmes: Access up to $100,000 per person using both HBP and FHSA together
- Consider larger deposit: Even reaching 15% down reduces premium from 4% to 2.8%
If you cannot reach 20% immediately, consider delaying your purchase to save more. Even increasing from 5% to 15% down reduces your premium rate from 4% to 2.8%, generating significant savings.
December 2024 Regulatory Changes (Still in Effect)
The Canadian government implemented significant changes to mortgage insurance rules effective December 15, 2024. These updates expand access to insured mortgages and affect eligibility criteria for thousands of buyers.
The price cap for insured mortgages increased from $1 million to $1.5 million. This means properties valued up to $1,499,999 now qualify for mortgage insurance with less than 20% down.
Since December 15, 2024, 30-year amortizations on insured mortgages are available to all first-time buyers (resale or new) and to all buyers of a newly built home. From August 1, 2024, they had been limited to first-time buyers purchasing a newly built home.
| Policy Element | Before Dec 2024 | After Dec 2024 |
|---|---|---|
| Price cap | $1,000,000 | $1,500,000 |
| 30-year amortization | First-time buyers of a newly built home (since Aug. 1, 2024) | All first-time buyers and all buyers of a newly built home |
| Eligible properties (30-year) | Newly built homes only | Resale or new (first-time buyers); new builds (all buyers) |
| Premium surcharge | +0.20% for 30-year term | +0.20% for 30-year term |
For a $400,000 mortgage at a 4% rate, extending from a 25-year to 30-year amortization reduces monthly payments by about $200 (from roughly $2,104 to $1,902). This improves debt-service ratios and helps buyers qualify for larger mortgages.
Insurance Vs 20% Down Payment
Choosing between paying mortgage insurance with a smaller down payment or saving until you reach 20% involves trade-offs between time, cost, and opportunity.
Mortgage insurance lets you enter homeownership sooner, potentially benefiting from property appreciation while building equity. However, the premium adds thousands to your total borrowing cost and increases your monthly payments.
Waiting to save 20% eliminates the insurance premium entirely but delays your purchase. During this time, home prices may increase, potentially offsetting your insurance savings.
- Enter market sooner: Start building equity and benefit from potential property appreciation immediately
- Lower initial cash requirement: Keep savings available for renovations, furniture, or emergency fund
- Access better rates: Insured mortgages often qualify for lower interest rates than uninsured mortgages
- Lock in housing costs: Mortgage payments typically stay more stable than rental increases over time
- Premium cost: Pay 2.8% to 4% of mortgage amount added to your total loan balance
- Interest on premium: Pay interest on the insurance premium amount over your entire amortization period
- Higher monthly payments: Larger mortgage balance means higher regular payments compared to 20% down
- Less equity initially: Start with minimal equity in your property, limiting refinancing flexibility
Consider your local market conditions, financial stability, and timeline when making this decision. If you’re comparing mortgage options, explore our best savings accounts to maximize returns while saving for a larger down payment.
Bottom Line
Home loans mortgage insurance enables Canadian buyers to purchase property with down payments as low as 5%, protecting lenders while expanding homeownership access. With less than 20% down, the premium costs between 2.80% and 4.00% of your mortgage amount (0.20% more with a 30-year amortization) based on your loan-to-value ratio.
Recent regulatory changes raised the insured mortgage cap to $1.5 million and made 30-year amortizations available to all first-time buyers and to all buyers of a newly built home. Three providers—CMHC, Sagen, and Canada Guaranty—offer comparable insurance products, with your lender typically selecting the provider during approval.
Calculate your total costs carefully, including the insurance premium and interest you’ll pay on it over time. Consider using the Home Buyers’ Plan and First Home Savings Account to reach 20% down and avoid insurance entirely. Stay informed about mortgage strategies and financial products by signing up for our newsletter to receive expert guidance delivered to your inbox.
Home Loans Mortgage Insurance – FAQ
What is the main purpose of mortgage insurance in Canada?
Mortgage insurance protects lenders against financial losses if borrowers default on their mortgages. It is mandatory when your down payment is less than 20% of the purchase price and allows qualified buyers to access home financing with smaller down payments.
At what down payment percentage do I need mortgage insurance?
You need mortgage insurance whenever your down payment is less than 20% of the property’s purchase price. For homes at $1.5 million or more, insurance is not available and you must provide at least 20% down.
Who are the mortgage insurance providers in Canada?
Three organizations provide mortgage insurance in Canada: CMHC (Canada Mortgage and Housing Corporation), Sagen (formerly Genworth), and Canada Guaranty. All three follow similar premium structures, and your lender typically selects which provider to use.
How much does mortgage insurance cost in 2026?
Premium rates range from 2.8% to 4% of your mortgage amount depending on your loan-to-value ratio. With a 5% down payment, you pay 4%; with 10% down, you pay 3.10%; and with 15% to 19.99% down, you pay 2.80%. Buyers who choose a 30-year amortization (first-time buyers or buyers of a newly built home) pay an additional 0.20%.
What regulatory changes affect mortgage insurance in 2026?
Effective December 15, 2024, the insured mortgage price cap increased from $1 million to $1.5 million. All first-time homebuyers (resale or new) and all buyers of a newly built home now qualify for 30-year amortization periods on insured mortgages, though a 0.20% premium surcharge applies.
Is paying mortgage insurance better than saving 20% down?
The answer depends on your financial situation and market conditions. Mortgage insurance lets you enter homeownership sooner and build equity, but costs 2.8% to 4% of your mortgage amount. Saving 20% eliminates this cost but delays your purchase, during which home prices may increase.
Can I avoid mortgage insurance with less than 20% down?
No, mortgage insurance is mandatory for all down payments below 20% on properties under $1.5 million. The only way to avoid it is to save at least 20% of the purchase price or purchase a property valued at $1.5 million or more, which requires 20% down.
Do I pay mortgage insurance monthly or as a lump sum?
Mortgage insurance is a one-time premium that you can pay as a lump sum when your mortgage begins or add to your mortgage balance and pay over time with interest. Most buyers choose to add it to their mortgage, though some provinces require upfront payment of provincial sales tax on the premium.