CMHC Mortgage Insurance in Canada: What It Costs and When It Applies

Mortgage default insurance — colloquially called "CMHC insurance" — is a cost that catches many first-time buyers off guard. You're not insuring yourself; you're protecting the lender. But understanding the tiers, the real costs, and how it affects your total mortgage can save you from unpleasant surprises at closing.

What Is CMHC Mortgage Insurance?

CMHC mortgage insurance is mortgage default insurance: it protects the lender (not you) if you stop making payments and the lender cannot recover the full mortgage balance from selling your home. Because lenders are protected against losses, they're willing to lend to buyers with down payments as low as 5%.

Without this insurance, most lenders would refuse mortgages below a 20% down payment, since a small equity cushion means the lender could face losses if home values decline and the borrower defaults. CMHC insurance essentially backstops the entire low-down-payment mortgage market in Canada.

The premium is calculated as a percentage of your mortgage amount and is added directly to your mortgage balance. You do not pay it out of pocket at closing. You pay it indirectly through slightly higher mortgage payments over the life of your mortgage.

When Is Mortgage Default Insurance Required?

Insurance is mandatory when:

• Your down payment is less than 20% of the purchase price
• The purchase price is under $1,500,000 (as of 2025 rule change; previously $1,000,000)
• The property will be your primary residence (not a rental or vacation home)
• The amortization period is 25 years or less (or 30 years if you're a first-time buyer under the expanded 2025 rules)

If your purchase price is $1,500,000 or more, a minimum 20% down payment is required and mortgage default insurance is unavailable — you must take a conventional (uninsured) mortgage.

The Three Premium Tiers

The premium rate depends on your loan-to-value (LTV) ratio — how much of the home's value you're borrowing:

The premium applies to the total insured mortgage amount — not the full purchase price and not just the amount above some threshold. This is a common source of confusion.

Real Cost Examples

Example 1: $600,000 Home with 5% Down

• Purchase price: $600,000
• Down payment (5%): $30,000
• Mortgage required: $570,000
• CMHC premium (4.00%): $570,000 × 4.00% = $22,800
• Total insured mortgage balance: $592,800
• Monthly payment at 4.19%, 25-year am.: approx. $3,197

Example 2: $600,000 Home with 10% Down

• Down payment (10%): $60,000
• Mortgage required: $540,000
• CMHC premium (3.10%): $540,000 × 3.10% = $16,740
• Total insured mortgage: $556,740
• Monthly payment at 4.19%, 25-year am.: approx. $3,001
• Savings vs. 5% down: $196/month (despite needing $30,000 more upfront)

Example 3: $600,000 Home with 20% Down (Conventional)

• Down payment (20%): $120,000
• Mortgage required: $480,000
• CMHC premium: None
• Monthly payment at 4.34% (typical uninsured rate), 25-year am.: approx. $2,628

Is It Always CMHC? The Three Insurers

Despite the common name "CMHC insurance," Canada actually has three approved mortgage default insurers:

• CMHC (Canada Mortgage and Housing Corporation): Government-owned, the largest insurer, and the one most people know. Premium rates above are CMHC's standard rates.
• Sagen (formerly Genworth Canada): A private insurer with identical premium tiers to CMHC. Some lenders prefer Sagen due to faster processing.
• Canada Guaranty: Another private insurer with competitive premiums and slightly different underwriting criteria — sometimes more flexible for self-employed borrowers or non-traditional income situations.

From a borrower's perspective, the premium rates are essentially identical across all three insurers. Your lender chooses which insurer to use — you typically have no say, and the cost to you is the same regardless.

Provincial Premium Taxes

Some provinces charge a provincial premium tax on mortgage insurance premiums. Unlike the insurance premium itself (which is added to your mortgage), provincial taxes must typically be paid upfront at closing:

In Ontario, on the $22,800 CMHC premium from Example 1 above, the provincial tax would be $22,800 × 8% = $1,824, due at closing. This is often missed in budget planning and surprises buyers. Include it in your closing cost estimates.

How to Avoid CMHC Insurance

Avoiding CMHC insurance requires a minimum 20% down payment. Here are practical paths to get there:

• First Home Savings Account (FHSA): Contribute up to $8,000/year (lifetime max $40,000) and withdraw tax-free for a qualifying home. A couple can contribute $80,000 combined.
• RRSP Home Buyers' Plan (HBP): Withdraw up to $60,000 per person ($120,000 per couple) from your RRSP, tax-free at withdrawal, with 15 years to repay.
• Gifted down payment: Immediate family members can gift you funds toward your down payment. A signed gift letter is required — no repayment conditions are permitted on insured mortgages.
• Buy a less expensive home first: Build equity in a starter home and use it toward 20%+ down on your next purchase.
• Target homes under $500K: The minimum required is only 5% on the first $500K, which may make the 20% threshold more achievable if you can find suitable properties in that range.

Does CMHC Insurance Hurt You Long-Term?

This is the question buyers most often ask. The answer is nuanced. The CMHC premium adds to your mortgage balance and means you pay interest on a slightly higher amount for the full amortization period. On a $22,800 premium at 4.19% over 25 years, you'll pay approximately $14,500 in extra interest over the full amortization.

However, consider the alternative: waiting to save a 20% down payment on a $600,000 home means saving $120,000 instead of $30,000 — an additional $90,000. If home prices appreciate even modestly (say 3–4% per year) while you're saving, the home you wanted for $600,000 may cost $660,000–$690,000 two years later. The cost of waiting can easily exceed the cost of the CMHC premium.

There is no universal right answer. If home prices are stable and you're close to 20% anyway, saving the extra down payment makes financial sense. If you're at 5% in a rising market and years from 20%, entering the market with CMHC insurance may be the better financial decision. Your broker can model both scenarios using current market data and your specific timeline.

Frequently Asked Questions

Is the CMHC premium refundable?

No. Once paid, the CMHC premium is non-refundable. It is "portable" — if you sell your home and buy a new one within three years, any unused portion of the insurance can be transferred to the new property, potentially reducing the new premium.

Can I cancel CMHC insurance once my equity reaches 20%?

No. CMHC insurance cannot be cancelled once applied. However, at renewal, if your home value has increased such that your mortgage balance is below 80% of the new appraised value, you may be able to refinance with an uninsured mortgage — though this involves new qualification and typically a higher rate.

Is the CMHC premium tax-deductible?

No, not for owner-occupied properties. If you're purchasing a rental property with mortgage insurance (which is less common), you may be able to deduct the premium as a business expense over time. Consult a tax professional for investment properties.

What happens to the CMHC premium if I port my mortgage?

If you port your mortgage (transfer it to a new property when you move), the existing CMHC insurance stays in place and your premium is credited toward any new premium required on the higher purchase price. This is one of the benefits of portability.