What Is Mortgage Loan Insurance in Canada? CMHC Explained (2025)

Buying your first home with a small down payment in 2025? You’ll likely need mortgage loan insurance, often referred to as CMHC (Canada Mortgage and Housing Corporation) insurance. For many first-time buyers, this can be confusing — is it protecting you, or your bank? Why do you need to pay for it? And how much will it really add to your monthly mortgage payments?

This guide breaks it all down in simple terms so you can make a smart decision about your mortgage journey in Canada.

What Is Mortgage Loan Insurance?

Mortgage loan insurance, also known as mortgage default insurance, is a mandatory insurance product if your down payment is less than 20% of the home’s purchase price.

• Who does it protect? It protects your lender, not you. If you stop paying your mortgage and default, the insurer pays the lender back.
• Why is it required? It reduces risk for the bank. In exchange, they’re willing to approve mortgages with as little as 5% down.

For many Canadians, especially first-time buyers in 2025, saving 20% can take years. Mortgage insurance opens the door to buying a home sooner and often at a lower interest rate compared to uninsured “high-risk” loans.

👉 Example: If you want to buy a $600,000 condo in Toronto, a 20% down payment would be $120,000. With CMHC insurance, you can buy with only $30,000 (5%) down.

When Do You Need Mortgage Insurance in Canada?

You’re required to get mortgage loan insurance if:

• Your down payment is under 20% of the purchase price.
• The home price is $1 million or less.

For homes above $1 million, insurance is not available — you must provide at least 20% down.
This rule applies across Canada, whether you’re in Ontario, British Columbia, or Alberta.

Who Provides Mortgage Loan Insurance?

Canada has three official providers:

1. CMHC (Canada Mortgage and Housing Corporation) – a federal government Crown corporation.
2. Sagen (formerly Genworth Canada) – a private insurer.
3. Canada Guaranty – another private insurer.

All three offer similar coverage and follow government rules. Your lender chooses the insurer, not you. However, because CMHC is government-backed, many Canadians still associate mortgage insurance with CMHC.

How Much Does Mortgage Loan Insurance Cost?

The cost depends on your loan-to-value (LTV) ratio, which is your mortgage compared to your home’s value.
Here’s the 2025 premium breakdown:

• 5% down (95% LTV) → ~4.00%
• 10% down (90% LTV) → ~3.10%
• 15% down (85% LTV) → ~2.80%
• 20%+ down (≤ 80% LTV) → No insurance required

👉 Example: On a $500,000 home with 5% down:

Total loan = $494,000 (premium added into mortgage)
Mortgage = $475,000
Premium = 4% × $475,000 = $19,000

Impact on Your Monthly Mortgage Payments

Because the premium is added to your loan, you pay it off gradually as part of your monthly mortgage payment.

• On a $400,000 mortgage, a 4% premium ($16,000) could add about $97/month to your payments.
• On a $600,000 mortgage, a 4% premium ($24,000) could add about $146/month.

While it does increase your payment, it allows you to enter the housing market sooner, which can make more financial sense in cities where prices keep rising.

How Do You Pay for Mortgage Insurance?

Once your loan balance falls below 80% of your home’s value, insurance is no longer required for refinances — though the premiums already paid are non-refundable.
Typically, the premium is rolled into your mortgage.
You don’t pay it upfront out of pocket.
Some lenders allow lump-sum payments, but this is rare.

Real-Life Example: First-Time Buyer in 2025

Imagine Emma, a 28-year-old first-time homebuyer in Vancouver. She’s buying a $650,000 condo with only 10% down ($65,000).

• Mortgage amount: $585,000
• Premium: 3.10% = $18,135
• Total mortgage: $603,135
• At a 5.5% interest rate, her payment increases about $110/month because of the insurance.

But here’s the trade-off: Emma enters the market 3 years earlier than if she had waited to save 20%. By then, condo prices could have risen much higher.

FAQs About Mortgage Loan Insurance in Canada

Q: Can I avoid CMHC insurance?
A: Only if you have 20% down or are buying a home over $1 million.

Q: Does it protect me?
A: No. It protects the lender. If you want personal coverage, consider mortgage life or disability insurance.

Q: Can I cancel mortgage insurance later?
A: Not directly. But once your balance is below 80% of your home’s value, insurance is not required when refinancing.

Q: Do CMHC rates differ from Sagen or Canada Guaranty?
A: Premiums are almost identical. The lender decides which provider they use.

Q: Is it tax deductible?
A: No. Mortgage insurance premiums are not tax deductible in Canada.

Want to go beyond the basics?
Here’s a detailed look at how CMHC mortgage insurance works and what it could cost you in 2025

Final Thoughts: Is Mortgage Loan Insurance Worth It in 2025?

Mortgage loan insurance is an extra cost — but it also unlocks homeownership for Canadians who don’t have 20% saved. It helps first-time buyers enter the market sooner, with a smaller down payment, and often at a better mortgage rate than uninsured high-risk loans.

If you’re planning to buy in 2025, speak with a mortgage advisor to run the numbers. In many cases, paying for insurance now is cheaper than waiting years while home prices rise.