PST on Mortgage Default Insurance: Which Provinces Charge It

With less than 20% down, your mortgage has to be insured against default, and the premium is usually added to the mortgage. In a few provinces, though, provincial sales tax applies to that premium, and the tax can’t be added to the mortgage: it’s due in cash on closing day, on top of the down payment and the other closing costs. It’s one of the lines on the statement of adjustments that first-time buyers are least likely to expect.

Which provinces charge PST on mortgage insurance

GST and HST don’t apply to the premium in any province; only the provincial taxes in the table do. The same tax applies whichever insurer your lender uses: CMHC, Sagen or Canada Guaranty.

How much the tax is

The tax is a percentage of the premium, and the premium is a percentage of the mortgage that depends on your down payment (the full schedule is on the CMHC insurance calculator). On a $500,000 home:

How it appears on closing day

Your lawyer collects the tax with the other funds due on closing and pays it to the province. In Ontario, on the 5%-down example above:

Everything else due at closing, from the land transfer tax to the legal fees, comes on top; the closing cost calculator estimates those and adds this tax to the cash due for a purchase in Ontario, Quebec or Saskatchewan.

Reducing the tax

The tax follows the premium, so anything that lowers the premium lowers the tax:

On its own the tax saving is small next to the extra down payment it takes. The larger effects of a bigger down payment are the lower premium, the smaller mortgage and the interest saved on both. At 20% or more down there’s no premium, so there’s no tax either.

Renewing, switching or refinancing

The tax is a one-time charge when the insured mortgage first funds, unless a new mortgage later needs a new premium. Whether an insured mortgage can be refinanced, and the price cap and other conditions for insurance, are covered in CMHC mortgage rules. For the minimum down payment that decides whether you need insurance at all, see the mortgage down payment calculator, and for what default insurance is and how buyers avoid it, what CMHC insurance is.