Mortgage Default Insurance in Canada (2025): Everything You Need to Know

You’ve finally found a home you love, but you only have a 5% down payment. That’s where mortgage default insurance — also known as CMHC insurance — comes in. It’s one of the most misunderstood parts of getting a mortgage in Canada. So let’s break it down in plain English and help you figure out what it means for your budget, approval, and monthly payments.

What is Mortgage Default Insurance?

Mortgage default insurance is protection — but not for you. It protects your lender if you stop making your mortgage payments and default on your loan.

In Canada, if you’re buying a home with less than 20% down, this insurance is required by law. It allows lenders to offer you a mortgage even with a smaller down payment, because the risk to them is reduced.

Why is it Mandatory in Canada?

Mortgage default insurance helps keep Canada’s housing market stable. It allows first-time buyers and lower-income households to buy homes without needing a huge 20% down payment, which can be hundreds of thousands of rupees in bigger cities.

In return, lenders are protected — and they’re more willing to approve your mortgage with a smaller deposit.

When Do You Need It?

If your down payment is **less than 20% of the purchase price**, your mortgage is considered **high-ratio**, and mortgage default insurance becomes mandatory.

The property must also meet these conditions:
• It must be owner-occupied (you or your immediate family will live there)
• The value must be **less than $1 million**
• You must meet the income and credit requirements set by the insurer

Understanding how rates have moved over time helps explain why default insurance exists in the first place. Take a look back at the history of mortgage rates in Canada to see how lenders and borrowers have adapted over the decades.

How Much Does It Cost?

The premium you pay is calculated as a percentage of your loan amount. The **lower your down payment**, the **higher your insurance premium**.

Here’s a general idea of the cost:
For example:
– 5% down → 4.00% premium
– 10% down → 3.10% premium
– 15% down → 2.80% premium

The good news? You don’t have to pay this upfront. It’s added to your mortgage amount and spread over your monthly payments.

Real-Life Example: How Aisha Bought a Home With 5% Down

Aisha is a graphic designer in Toronto. She found a $500,000 condo and had saved $25,000 — a 5% down payment.

Without mortgage insurance, she would’ve needed $100,000 to qualify.

Because she had default insurance through CMHC, her lender approved her mortgage. Her total mortgage became $495,000 (including the 4% premium), and she pays it off over 25 years.

Thanks to this insurance, she became a homeowner — even without a massive savings buffer.

Who Offers Mortgage Default Insurance in Canada?

There are three default mortgage insurers in Canada:
• **CMHC** (Canada Mortgage and Housing Corporation) – the most well-known and backed by the federal government.
• **Sagen (formerly Genworth Canada)** – private insurer.
• **Canada Guaranty** – another private provider.

Lenders choose the insurer — you don’t. But they all follow similar rules for approval and premiums.

What Properties Are Eligible?

Not all properties qualify. To get a CMHC-insured mortgage:
• The home must be located in Canada
• It must be your primary residence
• The property value must be **under $1 million**
• Amortization must be **25 years or less**

Rental or investment properties don’t qualify for default insurance unless you put down at least 20%.

Can You Avoid It?

Yes — but only by putting down **20% or more**. Once your down payment hits that mark, mortgage insurance is no longer required.

You can also avoid it if you buy a home worth **more than $1 million**, because insurance isn’t available at that price — but then you’d be forced to come up with at least 20% anyway.

Is CMHC Insurance the Same as Mortgage Protection Insurance?

No — they sound similar but are completely different.
– Mortgage default insurance (CMHC) protects the lender, in case you default.
– Mortgage protection insurance is optional coverage that protects you— helping pay your mortgage in case of death, disability, or job loss.
Don’t confuse the two! CMHC insurance is mandatory in some cases. Mortgage protection insurance is a personal choice.

Final Thoughts from a Mortgage Expert

Mortgage default insurance isn’t something to fear — it’s a tool that helps thousands of Canadians buy homes sooner. If you don’t have 20% saved up, it can be the bridge between renting and owning.

Work with a broker who can walk you through your options. They’ll calculate the cost, show you how it affects your payments, and help you compare insured vs. uninsured mortgages.
Remember, your mortgage isn’t just about getting approved — it’s about making sure it fits your life and future goals.

📞 Have Questions About Default Insurance or Your Mortgage?

Whether you’re a first-time buyer or renewing your loan, understanding your mortgage insurance options can save you money and stress. Speak to a licensed expert today. 💬 Talk to a Mortgage Expert