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What Is Mortgage Loan Insurance in Canada? CMHC Explained (2025)
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Buying your first home with a small down payment? You’ll likely need mortgage loan insurance. This guide explains what it is, when it’s required, how it impacts your payments, and how it helps Canadians become homeowners with less than 20% down.
[Insert clickable Table of Contents block here]
• What Is Mortgage Loan Insurance?
• When Do You Need Mortgage Insurance in Canada?
• Who Provides Mortgage Loan Insurance?
• How Mortgage Insurance Premiums Work
• Impact on Your Monthly Payments
• How to Pay for Mortgage Insurance
• Related FAQs
What Is Mortgage Loan Insurance?
Mortgage loan insurance, also called mortgage default insurance, protects the lender—not you—if you stop making your mortgage payments. It ensures the lender gets repaid even if you default. In return, it allows you to buy a home with as little as 5% down.
This insurance opens the door to homeownership for Canadians who can’t afford a 20% down payment, while still keeping mortgage rates relatively low for high-ratio borrowers.
When Do You Need Mortgage Insurance in Canada?
You’re required to have mortgage loan insurance if your down payment is less than 20% of the home’s purchase price. This is referred to as a high-ratio mortgage. If you’re putting 20% or more down, insurance is not required.
The insurance is mandatory by law for homes under $1 million. Homes over that price require a 20%+ down payment and are not eligible for insurance.
Who Provides Mortgage Loan Insurance?
Canada has three licensed mortgage insurers:
– CMHC (Canada Mortgage and Housing Corporation) – government-backed
– Sagen (formerly Genworth Canada)
– Canada Guaranty
All three insurers offer similar coverage. Your lender typically chooses which one to work with, not you.
How Mortgage Insurance Premiums Work
The cost of mortgage insurance is based on your loan-to-value (LTV) ratio—the higher your LTV, the higher your insurance premium. Here’s a general breakdown:
– 5%–9.99% down: ~4.00% premium
– 10%–14.99% down: ~3.10% premium
– 15%–19.99% down: ~2.80% premium
For example, if you buy a $500,000 home with 5% down ($25,000), you’ll need a $475,000 mortgage. The 4% insurance premium = $19,000, which is typically added to your loan.
Impact on Your Monthly Payments
Since the insurance premium is added to your mortgage amount, it increases the total you repay over time. However, it allows you to buy sooner and avoid saving for years more.
With today’s rates, a 4% insurance premium can add $80–$120/month to your payment on a typical first-time buyer mortgage. Despite this, it often works out better than renting or delaying ownership while prices rise.
How to Pay for Mortgage Insurance
You don’t pay mortgage insurance upfront in cash. It’s usually rolled into your mortgage and repaid over time as part of your regular mortgage payments. Some lenders may allow you to pay it as a lump sum, but this is rare.
Once your mortgage balance falls below 80% of your home’s value, mortgage insurance coverage ends—but the premiums are non-refundable.
📊 CMHC Premium vs. Down Payment Breakdown – 2025
| Down Payment Range | Loan-to-Value (LTV) | CMHC Premium Rate | On $400K Mortgage |
|---|---|---|---|
| 5% (Minimum) | 95% | 4.00% | $16,000 |
| 10% | 90% | 3.10% | $12,400 |
| 15% | 85% | 2.80% | $11,200 |
| 20%+ | ≤ 80% | Not Required | $0 |
📌 *The more you put down, the lower your insurance premium — and with 20% or more, mortgage insurance is no longer required. Rates shown are for owner-occupied properties. Premium is usually added to the mortgage total.
💸 Monthly Impact of Mortgage Insurance by Loan Size (25-Year Term @ 5.5%)
| Base Mortgage Amount | CMHC Premium (4%) | Total Loan w/ Premium | Monthly Payment Increase |
|---|---|---|---|
| $300,000 | $12,000 | $312,000 | +$73/month |
| $400,000 | $16,000 | $416,000 | +$97/month |
| $500,000 | $20,000 | $520,000 | +$121/month |
| $600,000 | $24,000 | $624,000 | +$146/month |
📌 *Assumes a 25-year amortization and 5.5% interest rate. CMHC premium is added to the loan and amortized along with it. Actual payments may vary based on term and rate.
Related FAQs
Q. Can I avoid mortgage insurance?
A. Only if you have at least 20% down or are buying a home over $1 million (where insurance isn’t allowed).
Q. Does mortgage insurance protect me?
A. No—it protects the lender. For borrower coverage, consider life or disability insurance.
Q. Can I cancel mortgage insurance later?
A. Not directly. But once your mortgage drops below 80% of the home’s value, the insurance is no longer required on refinances.
Q. Does CMHC provide better rates than private insurers?
A. Rates are similar across all three providers. Your lender chooses the insurer.
Q. Is mortgage insurance tax deductible?
A. No, it is not tax deductible in Canada.
Final Thoughts: Is Mortgage Loan Insurance Worth It?
Mortgage loan insurance enables Canadians to buy with less money upfront. It adds cost, but also access. If you’re confident in your income and plan to stay in your home, it’s a worthwhile tradeoff to become a homeowner sooner.
Speak to a mortgage advisor to understand how much you’ll pay, how it impacts your loan, and whether it fits your plan for buying in 2025.
