Guide to Mortgage Insurance in Canada
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Mortgage insurance in Canada makes homeownership accessible to buyers who cannot put down 20% or more. Whether you are purchasing your first home or refinancing, understanding how this insurance works—and who it protects—can save you thousands and help you make informed decisions. This guide explains the two main types of mortgage insurance, how premiums are calculated, and what you need to know in 2026.
You will learn how to lower your costs, avoid common pitfalls, and choose the right coverage for your situation.
What Is Mortgage Insurance in Canada?
Mortgage insurance in Canada refers to two distinct products: mortgage default insurance and mortgage protection insurance. Default insurance is mandatory when your down payment is less than 20% of the purchase price. It protects the lender if you cannot make payments.
Protection insurance, in contrast, is optional. It covers your mortgage balance or payments in the event of death, critical illness, disability, or job loss. This type protects you and your family, not the lending institution.
As of December 2024, insured mortgages are available on homes valued up to $1.5 million, an increase from the previous $1 million cap. This change expands access for buyers in higher-cost markets such as Toronto and Vancouver.
Types of Mortgage Insurance
Mortgage Default Insurance
Mortgage default insurance is required by law when your down payment is below 20%. It allows lenders to offer competitive rates on high-ratio mortgages, which are loans with a loan-to-value ratio above 80%.
Three providers dominate the Canadian market: Canada Mortgage and Housing Corporation (CMHC), Sagen (formerly Genworth), and Canada Guaranty. All three operate under federal oversight by the Office of the Superintendent of Financial Institutions (OSFI).
The insurance premium is a one-time charge added to your mortgage balance. You can pay it upfront or finance it over the life of your loan. Provincial sales tax may apply in Ontario, Quebec, and Saskatchewan, and this tax must be paid at closing.
Mortgage Protection Insurance
Mortgage protection insurance is sold by banks and insurers. It pays your mortgage balance or monthly payments if you experience a covered event. Common types include life insurance, critical illness insurance, disability insurance, and job loss insurance.
Coverage limits vary by provider. For example, BMO offers up to $750,000 in life coverage and $450,000 for critical illness. TD provides up to $1 million in combined mortgage life and critical illness insurance.
This insurance is optional. You may choose to purchase a separate term life policy instead, which often offers better value and portability if you switch lenders or sell your home.
How Default Insurance Works
When you apply for a mortgage with less than 20% down, your lender arranges default insurance on your behalf. The insurer evaluates your file and sets the premium based on your loan-to-value ratio and other risk factors.
Coverage begins when your mortgage funds and continues until your balance drops below 80% of the original property value. You cannot cancel the insurance before reaching this threshold, even if your home appreciates in value.
If you default, the insurer reimburses the lender for losses that exceed what is recovered through foreclosure or power of sale. The insurer may then pursue you for the shortfall, though this is uncommon in practice.
Minimum Down Payment Rules
The minimum down payment depends on the purchase price. For homes up to $500,000, you need 5%. For homes between $500,000 and $1,499,999, you need 5% on the first $500,000 and 10% on the remaining amount.
Homes priced at $1.5 million or more require a 20% down payment and do not qualify for default insurance. Refinances for secondary suite construction are eligible up to $2 million at 90% loan-to-value.
- $400,000 home: Minimum down payment of $20,000 (5%)
- $600,000 home: Minimum down payment of $35,000 (5% on first $500K + 10% on $100K)
- $1,200,000 home: Minimum down payment of $95,000 (5% on first $500K + 10% on remaining $700K)
- $1,500,000 home: Minimum down payment of $300,000 (20%, no insurance available)
Mortgage Insurance Costs in 2026
Premiums range from 0.60% to 4.20% of your mortgage amount, depending on your loan-to-value ratio and amortization period. A 25-year amortization carries the standard rate, while a 30-year term adds an extra 0.20%.
The premium is calculated by multiplying your mortgage amount by the applicable rate. For example, a $450,000 mortgage at 95% loan-to-value with a 25-year amortization incurs a 4.00% premium, totalling $18,000.
| Loan-to-Value Ratio | 25-Year Amortization | 30-Year Amortization |
|---|---|---|
| Up to 65% | 0.60% | 0.80% |
| 65.01% to 75% | 1.70% | 1.90% |
| 75.01% to 80% | 2.40% | 2.60% |
| 80.01% to 85% | 2.80% | 3.00% |
| 85.01% to 90% | 3.10% | 3.30% |
| 90.01% to 95% | 4.00% | 4.20% |
Rates and terms may vary by financial institution. Provincial sales tax applies in Ontario (8%), Quebec (9%), and Saskatchewan (6%). This tax is due at closing and cannot be added to your mortgage.
Example Premium Calculation
Consider a $625,000 home purchase. Your minimum down payment is $37,500 (5% on $500K plus 10% on $125K). Your mortgage amount is $587,500, and your loan-to-value ratio is 94%.
With a 25-year amortization, your premium rate is 4.00%. Your insurance cost is $587,500 × 4.00% = $23,500. If you are in Ontario, you also pay 8% PST on this premium, adding $1,880 due at closing.
Your total mortgage becomes $611,000 ($587,500 + $23,500). If you choose a 30-year amortization as a first-time buyer purchasing a newly built home, your rate increases to 4.20%, raising the premium to $24,675.
Mortgage Protection Insurance
Mortgage protection insurance is offered by most major lenders, including RBC, TD, BMO, and CIBC. It is marketed as a convenience, allowing you to add coverage when you sign your mortgage.
However, this insurance has limitations. Coverage is tied to your mortgage balance, which declines over time, while premiums often remain level. If you switch lenders, you may need to reapply and could be denied based on age or health changes.
Types of Coverage Available
- Life Insurance: Pays your mortgage balance if you pass away, up to $750,000 to $1 million depending on the provider
- Critical Illness Insurance: Covers mortgage balance if diagnosed with cancer, heart attack, or stroke, typically up to $450,000
- Disability Insurance: Pays monthly mortgage payments for up to 24 months per claim, maximum $3,000 to $4,000 per month
- Job Loss Insurance: Covers payments for up to 6 months per job loss, with a 60-day waiting period and eligibility for EI benefits
Premiums depend on your age, mortgage balance, and coverage level. A 35-year-old non-smoker with a $500,000 mortgage might pay $20 to $50 per month for life insurance. Adding critical illness or disability coverage increases this amount.
Alternative Options
Many financial advisors recommend purchasing separate term life insurance instead of mortgage protection insurance. Term policies offer more flexibility, fixed death benefits, and portability between lenders.
You can name anyone as the beneficiary, not just your lender. If you move or refinance, your coverage continues without reapplication. Rates are often lower for the same level of protection.
Benefits of Mortgage Insurance
- Access to homeownership: Buy with as little as 5% down, entering the market sooner and building equity earlier
- Competitive interest rates: Insured mortgages often qualify for lower rates because lenders face reduced risk
- Expanded eligibility: Borrowers with lower credit scores or irregular income may qualify more easily for insured mortgages
- Higher price cap: Insured mortgages now available up to $1.5 million, helping buyers in expensive markets
- 30-year amortization: First-time buyers and new construction purchasers can extend repayment, lowering monthly payments
Drawbacks to Consider
- Increased borrowing cost: Premiums add thousands to your mortgage balance, increasing total interest paid over time
- No benefit to borrower: Default insurance protects the lender, not you, in case of default
- Mandatory provincial tax: PST on premiums in Ontario, Quebec, and Saskatchewan must be paid upfront at closing
- Cannot cancel early: Coverage remains until loan-to-value drops below 80%, even if home value rises
- Protection insurance limitations: Coverage declines with mortgage balance, not portable between lenders, may require reapplication
Who Needs Mortgage Insurance?
Default insurance is mandatory if your down payment is below 20%. You have no choice in this matter. However, you can control costs by maximizing your down payment to lower your loan-to-value ratio.
Protection insurance is optional. It may suit you if you have dependants who rely on your income, lack other life insurance, or work in an industry with high job loss risk. It can also provide peace of mind during early homeownership when savings are limited.
If you already have term life insurance, disability coverage through your employer, or significant emergency savings, mortgage protection insurance may be redundant. Compare the cost and coverage of separate policies before committing.
Regulatory Oversight and Providers
All mortgage default insurers in Canada operate under federal regulation. OSFI sets capital requirements, risk management standards, and premium guidelines to maintain financial stability.
CMHC is a Crown corporation and the largest provider. Sagen and Canada Guaranty are private insurers. All three offer similar products, and lenders choose the insurer based on business relationships and pricing.
You have no direct control over which insurer is selected. Your lender applies for coverage during the approval process. Premium rates are standardized across providers, so your cost will be the same regardless of insurer.
2026 Policy Changes
Several rule changes took effect in late 2024 and apply throughout 2026. The insured mortgage price cap increased from $1 million to $1.5 million as of December 15, 2024. This allows more buyers in high-cost cities to access insured financing.
First-time buyers and purchasers of newly built homes can now choose 30-year amortizations on insured mortgages. This option reduces monthly payments but increases total interest paid. An additional 0.20% premium applies to 30-year terms.
Refinances for the purpose of building legal secondary suites are now eligible for default insurance up to $2 million at 90% loan-to-value. This change supports efforts to increase housing supply through laneway homes and basement suites.
Before finalizing your mortgage, compare your options using tools like our credit card comparison page to find rewards that offset closing costs, or explore high-interest savings accounts to accelerate your down payment savings.
Bottom Line
Mortgage insurance serves two purposes in Canada. Default insurance protects lenders and allows you to buy with less than 20% down. Protection insurance covers your mortgage if you face illness, disability, or job loss.
Default insurance is mandatory below 20% down and costs between 0.60% and 4.20% of your mortgage. The premium is added to your loan balance and paid over time. Provincial tax applies in some regions and is due at closing.
Protection insurance is optional. Compare lender-offered products against standalone term life and disability policies. Standalone coverage often provides better value, portability, and control over beneficiaries.
If you are buying in 2026, factor insurance costs into your budget. Maximize your down payment where possible, explore programs like the FHSA and Home Buyers’ Plan, and shop around for the best rates. Stay informed by signing up for our newsletter to receive updates on mortgage trends, rate changes, and strategies to save money.
Mortgage Insurance – FAQ
What is mortgage insurance in Canada?
Mortgage insurance in Canada includes default insurance, which protects the lender when your down payment is below 20%, and protection insurance, which covers your mortgage payments in case of death, illness, or job loss. Default insurance is mandatory for high-ratio mortgages, while protection insurance is optional.
How much does mortgage insurance cost in Canada?
Default insurance premiums range from 0.60% to 4.20% of your mortgage amount, depending on your loan-to-value ratio and amortization period. For example, a $500,000 mortgage at 95% loan-to-value with a 25-year term incurs a 4.00% premium, totalling $20,000. Provincial sales tax may apply in Ontario, Quebec, and Saskatchewan.
What is the difference between mortgage default insurance and mortgage protection insurance?
Default insurance protects the lender if you default on your mortgage and is required when you put down less than 20%. Protection insurance protects you and your family by covering mortgage payments or balance if you experience death, critical illness, disability, or job loss. Default insurance is mandatory; protection insurance is optional.
Who provides mortgage insurance in Canada?
Three main providers offer mortgage default insurance in Canada: Canada Mortgage and Housing Corporation (CMHC), Sagen (formerly Genworth), and Canada Guaranty. All operate under federal oversight by the Office of the Superintendent of Financial Institutions. Your lender selects the insurer during the approval process.
Can I avoid paying mortgage insurance in Canada?
Yes, you can avoid default insurance by putting down 20% or more of the purchase price. Use savings programs like the First Home Savings Account (up to $40,000) and Home Buyers’ Plan (up to $60,000 from your RRSP) to reach this threshold. Homes priced at $1.5 million or more always require 20% down.
What is the maximum home price for insured mortgages in Canada?
As of December 15, 2024, the maximum home price for insured mortgages increased to $1,499,999. Homes priced at $1.5 million or more require a minimum 20% down payment and do not qualify for default insurance. Refinances for secondary suite construction are eligible up to $2 million at 90% loan-to-value.
Is mortgage protection insurance worth it?
Mortgage protection insurance can provide peace of mind, but it often costs more than standalone term life insurance and offers less flexibility. Coverage declines as your mortgage balance decreases, and you may need to reapply if you switch lenders. Compare lender products against individual life and disability policies before deciding.
Do I pay mortgage insurance premiums monthly?
No, default insurance is a one-time premium added to your mortgage balance. You pay it off over the life of your loan through your regular mortgage payments. Provincial sales tax on the premium, where applicable, must be paid upfront at closing and cannot be financed.
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