Mortgage Default Insurance Explained: CMHC, Sagen & Canada Guaranty in 2026

If you're putting less than 20% down on a Canadian home, you're paying for mortgage default insurance — whether you wanted to or not. It's mandatory, it's added to your mortgage balance, and most buyers misunderstand who it actually protects.

This guide breaks down what mortgage default insurance does, what the 2026 premium tables look like, and how to think about it as a borrower.

What Mortgage Default Insurance Actually Does

Mortgage default insurance protects the lender, not you. If you stop making payments and the lender forecloses, the insurer makes the bank whole on any shortfall.

So why do you pay for it? Because without it, lenders would charge a much higher interest rate (or refuse the loan entirely) on any mortgage with less than 20% down. The insurance lets banks lend to higher-leverage borrowers at near-prime rates because they know the insurer is backstopping the loss.

The trade: you pay a one-time premium (added to the mortgage), and in return you get access to a 5–19.99%-down mortgage at competitive rates.

When You Need It

You need default insurance if:

• Your down payment is less than 20% of the purchase price
• The property is owner-occupied
• The purchase price is $1.5 million or less (new cap effective late 2024)

You don't need it if:

• Your down payment is 20% or more (this is "conventional" or "uninsured")
• The property is over $1.5M (insurance not available — must be 20%+ down)
• It's a rental property with 1–4 units (different program — typically requires 20% down)

The Three Insurers

Three companies are licensed to provide mortgage default insurance in Canada:

1. CMHC (Canada Mortgage and Housing Corporation)

A federal Crown corporation. The largest insurer, government-backed, and the default for many lenders. Slightly stricter underwriting on debt service ratios (GDS 39 / TDS 44 in 2026, with some lender flexibility).

Strength: Universal lender acceptance. Strong programs for self-employed and newcomers.

2. Sagen (formerly Genworth Canada)

Private insurer. Often used by lenders for borderline files. Slightly more flexible on stated-income self-employed and BFS programs.

Strength: Most flexible on non-standard income. Their Business For Self program is widely considered the most generous in the market.

3. Canada Guaranty

Private insurer, fully Canadian-owned. Newest of the three but has carved out a niche with strong programs for newcomers to Canada and purchase-plus-improvements.

Strength: Best-in-class purchase-plus-improvements insurance. Strong newcomer programs.

You don't usually choose your insurer — your lender does. But you can ask your broker which insurer they're submitting to, especially if your file has a quirk that one insurer might handle better.

2026 Premium Rates (Standard Owner-Occupied)

The premium is calculated on the mortgage amount (not the purchase price) and varies based on your loan-to-value ratio:

Real-world example: $700,000 purchase, $35,000 down (5%), $665,000 mortgage. Premium = 4.00% × $665,000 = $26,600, added to your mortgage balance. Your starting balance becomes $691,600.

Premium Surcharges to Watch For

Insurers add small premium surcharges for non-standard situations:

• Extended amortization (30 years for first-time new-build buyers): +0.20%
• Self-employed stated income: +0.85% to +1.50% depending on insurer
• Non-traditional down payment (borrowed funds): +0.45%
• Second home / vacation property: +0.35%

These compound. A self-employed first-time buyer of a new build with 5% down on a $700K home could see their premium go from 4.00% to 5.05%.

The $1.5M Cap (Big 2024–2026 Change)

Until late 2024, default insurance was only available on purchases up to $1,000,000. The federal government raised this to $1,500,000 to help first-time buyers in Toronto and Vancouver. This is fully in effect for 2026.

Practical impact: a Toronto buyer can now purchase a $1.4M home with as little as $120,000 down ($25K + 10% × $900K = $115K + buffer). Pre-2024 they would have needed $280K (20% of $1.4M).

The premium on that file would be roughly $42,000 added to the mortgage — significant, but it unlocks $160K of equity that the buyer doesn't need to put down.

How the Premium Is Paid

Almost universally: added to your mortgage balance and amortized over the loan. You don't write a cheque at closing.

Provincial sales tax on the premium: Ontario, Quebec, Saskatchewan, and Manitoba charge PST on the insurance premium itself. This must be paid in cash at closing — it can't be added to the mortgage. On a $26,000 premium in Ontario (8% PST), that's a $2,080 closing-day surprise if you didn't budget for it.

When You Can Drop the Insurance

You can't. Once a mortgage is insured, the insurance stays for the life of the loan with that lender. Even after your loan-to-value drops below 80% (through paydown or appreciation), you don't get a refund.

However: at renewal, if you're now under 80% LTV and switch to a different lender, you can typically renew uninsured with a new lender — and access uninsured-rate pricing. Many borrowers do this at year 5.

Insured vs Uninsured Rates

In 2026, insured 5-year fixed rates run roughly 4.00–4.25%, while uninsured (20%+ down) 5-year fixed rates run 4.20–4.50%. The 0.20–0.30% spread reflects that the lender takes on more risk on uninsured deals.

This creates an interesting math problem at the 20% down threshold: putting exactly 20% down can sometimes cost you a higher rate than putting 19.99% down (insured). Your broker should run both scenarios.

Should You Try to Avoid It?

The honest answer: no, not if it forces you to delay the purchase by 2+ years. Default insurance lets you enter the market with as little as 5% down. The opportunity cost of missing 2 years of appreciation often dwarfs the premium cost.

But if you can comfortably hit 20% down without delaying or stripping your emergency fund, you'll save the premium and access better long-term rate flexibility.

Run both scenarios with our mortgage calculator before you decide.