CMHC Insurance Explained: What It Is and Who Needs It

Buying a home with less than 20% down payment? You'll need mortgage default insurance. While it adds to your costs, it also lets you buy sooner rather than waiting years to save more. Here's what you need to know about CMHC insurance and why it might actually work in your favor.

What Is CMHC Insurance?

CMHC (Canada Mortgage and Housing Corporation) insurance protects lenders—not you—if you default on your mortgage. Despite protecting the lender, the borrower pays the premium.

Also called "mortgage default insurance" or "high-ratio mortgage insurance."

When Is It Required?

Mortgage insurance is mandatory when your down payment is less than 20%.

This means:

• First-time buyers with minimum down payments
• Move-up buyers using less than 20% down
• Anyone with a "high-ratio" mortgage

Insurance Providers

Three companies provide mortgage default insurance in Canada:

The premium is added to your mortgage and paid over the amortization period—not due upfront.

Ready to Buy With Less Than 20% Down?

Get pre-approved today and we'll guide you through the CMHC insurance process. It's simpler than you think.

Example Calculation

For a $500,000 home with 5% down ($25,000):

• Mortgage amount: $475,000
• CMHC premium (4%): $19,000
• Total mortgage: $494,000

Your monthly payment covers both the mortgage and the insurance premium over your amortization.

The Silver Lining: Benefits of Insured Mortgages

While the premium adds to your costs, insured mortgages offer advantages:

1. Lower Interest Rates

Insured mortgages often qualify for rates 0.10-0.20% lower than uninsured mortgages. Over 25 years, this can offset much of the premium cost.

2. Buy Sooner

Instead of waiting years to save 20%, you can enter the market sooner—potentially before prices rise further.

3. Build Equity Faster

Paying a mortgage builds equity. Paying rent builds your landlord's equity.

4. Premium Is Added to Mortgage

No lump sum needed at closing. The premium is financed over your mortgage term.

Maximum Property Price

Insured mortgages have limits:

• Maximum purchase price: $1,000,000
• Maximum amortization: 25 years (30 years not available)
• Property must be owner-occupied

For properties over $1 million, you need at least 20% down.

FAQ

Q: Is the CMHC premium tax-deductible?
A: Not for your principal residence. Investment properties may be different.

Q: Can I avoid insurance with 20% down?
A: Yes. With 20%+ down, insurance isn't required. But compare rates—insured mortgages sometimes have better rates.

Q: Does insurance protect me if I lose my job?
A: No. CMHC insurance protects the lender, not you. Consider separate job loss protection if concerned.

Q: Can I pay the premium upfront?
A: Technically possible, but rarely done. Adding to the mortgage is simpler.

What's Next

Don't let the down payment barrier stop you. Get pre-approved to see exactly what you can afford with CMHC insurance factored in.