CMHC Insurance Explained: What It Is, What It Costs, and How to Avoid It

If you are buying a home in Canada with less than a 20% down payment, you will encounter CMHC insurance. It is one of the most misunderstood parts of the mortgage process, so let us break it down clearly.

What Is CMHC Insurance?

CMHC (Canada Mortgage and Housing Corporation) mortgage default insurance protects the lender — not you — in case you default on your mortgage. Despite protecting the lender, you pay the premium.

It is required by law on any mortgage where the down payment is less than 20% of the purchase price. This is called a "high-ratio" mortgage.

Three insurers offer this product in Canada:

• CMHC (a Crown corporation)
• Sagen (formerly Genworth)
• Canada Guaranty

The premiums are the same across all three.

How Much Does It Cost?

The premium is a percentage of your mortgage amount (not the purchase price), and the rate depends on your loan-to-value (LTV) ratio:

| Down Payment | LTV Ratio | Insurance Premium | |---|---|---| | 5% - 9.99% | 90.01% - 95% | 4.00% of mortgage | | 10% - 14.99% | 85.01% - 90% | 3.10% of mortgage | | 15% - 19.99% | 80.01% - 85% | 2.80% of mortgage | | 20%+ | 80% or less | No insurance required |

Real Example

Purchase price: $600,000
Down payment: $30,000 (5%)
Mortgage amount: $570,000
Insurance premium: $570,000 × 4.00% = $22,800

Your total mortgage becomes $592,800. The insurance premium is added to your mortgage and amortized over the full term — you do not pay it upfront.

On a 25-year mortgage at 5.25%, that $22,800 in CMHC insurance adds approximately $136 per month to your payment.

The Rules

CMHC-insured mortgages have specific requirements:

• Maximum amortization: 25 years (not 30)
• Maximum purchase price: $1,000,000 (insured mortgages are not available on properties over $1M)
• Minimum credit score: Generally 600+ for insured mortgages
• Property must be owner-occupied (not a rental or investment property)
• Stress test applies at the qualifying rate

Strategies to Minimize Insurance Costs

1. Increase Your Down Payment to the Next Tier

If you are at 9% down, getting to 10% drops your premium from 4.00% to 3.10%. On a $500,000 mortgage, that saves:

• At 9%: $455,000 × 4.00% = $18,200
• At 10%: $450,000 × 3.10% = $13,950
• Savings: $4,250

2. Use the FHSA and RRSP Together

Combine the First Home Savings Account ($40,000) with the Home Buyers' Plan ($60,000 per person) to maximize your down payment from tax-advantaged accounts.

3. Accept a Gift

Immediate family members can gift funds for a down payment. A signed gift letter confirming no repayment is expected is required.

4. Save to 20%

If you can get to 20% down, you avoid insurance entirely. The trade-off is time — you may be saving while home prices continue to rise. This needs to be weighed carefully.

Is CMHC Insurance Bad?

Not necessarily. Without mortgage default insurance, many Canadians could not buy a home until they saved 20% — which in expensive markets could take a decade or more. CMHC insurance exists to make homeownership more accessible.

The key is understanding the cost and factoring it into your decision. Sometimes it makes more financial sense to buy now with 5% down (and pay the insurance) than to wait years to save 20% while prices rise.

Check Your Numbers

Use our mortgage calculator to see exactly how CMHC insurance affects your specific purchase — including the premium amount, monthly payment impact, and total cost over the mortgage.

Talk to us about your down payment options →