Mortgage default insurance protects the lender in the case that you default on your mortgage. Mortgage insurance is typically required in Canada if your down payment is less than 20%. This calculator helps you estimate the premium you will have to pay and how it will impact your home purchase.
What is Mortgage Default Insurance?
Mortgage default insurance protects the lender — not you — in the event that you are unable to make payments on your mortgage. By insuring the loan, mortgage default insurance allows lenders to offer mortgages to borrowers who have smaller down payments, making homeownership more accessible.
In Canada, mortgage default insurance is required by law when your down payment is less than 20% of the purchase price. Even though the insurance protects the lender, the borrower pays the premium.
Mortgage Insurance Providers in Canada
There are three providers of mortgage default insurance in Canada, and all three offer the same premium rates:
| Provider | Type | Notes |
|---|---|---|
| Canada Mortgage and Housing Corporation (CMHC) | Crown corporation | The most well-known provider; often why people call it “CMHC insurance” |
| Sagen (formerly Genworth Canada) | Private insurer | Second-largest provider in Canada |
| Canada Guaranty | Private insurer | Third option; increasingly popular with lenders |
Your lender chooses which insurer to use — you generally do not get to select the provider. All three charge the same premium rates, so the cost to you is identical regardless of which insurer your lender uses.
When is Mortgage Default Insurance Required?
Mortgage default insurance is mandatory when your down payment is less than 20% of the home’s purchase price. In addition:
- The home’s purchase price must be under $1,500,000 (as of the December 2024 rule change; previously $1,000,000)
- The maximum amortization for an insured mortgage is 25 years (30 years for first-time buyers purchasing new builds, as of August 2024)
- Buyers with a 20% or larger down payment do not need mortgage default insurance, though lenders may still purchase it at their own cost
Mortgage Insurance Premium Rates
The cost of mortgage insurance depends on your loan-to-value (LTV) ratio — the percentage of the home’s value that you are borrowing.
LTV Formula: LTV = (Home Price − Down Payment) ÷ Home Price
| Loan-to-Value Ratio | Premium (% of Loan Amount) | Example: $465,000 Loan |
|---|---|---|
| Up to 65% | 0.60% | $2,790 |
| 65.01% to 75% | 1.70% | $7,905 |
| 75.01% to 80% | 2.40% | $11,160 |
| 80.01% to 85% | 2.80% | $13,020 |
| 85.01% to 90% | 3.10% | $14,415 |
| 90.01% to 95% | 4.00% | $18,600 |
If you have a non-traditional down payment (gifted, borrowed, or from a grant) and your LTV is between 90.01% and 95%, the premium rate increases to 4.50%.
Worked Examples at Different Down Payments
| Home Price | Down Payment | Down Payment % | Loan Amount | LTV | Premium Rate | Insurance Premium |
|---|---|---|---|---|---|---|
| $400,000 | $20,000 | 5% | $380,000 | 95% | 4.00% | $15,200 |
| $400,000 | $40,000 | 10% | $360,000 | 90% | 3.10% | $11,160 |
| $400,000 | $60,000 | 15% | $340,000 | 85% | 2.80% | $9,520 |
| $500,000 | $25,000 | 5% | $475,000 | 95% | 4.00% | $19,000 |
| $500,000 | $50,000 | 10% | $450,000 | 90% | 3.10% | $13,950 |
| $750,000 | $75,000 | 10% | $675,000 | 90% | 3.10% | $20,925 |
| $1,000,000 | $100,000 | 10% | $900,000 | 90% | 3.10% | $27,900 |
Note: For homes priced between $500,000 and $1,500,000, the minimum down payment is 5% on the first $500,000 and 10% on the portion above $500,000.
| LTV Ratio | Down Payment % | Premium Rate | Your Premium |
|---|
PST on Mortgage Insurance by Province
In most provinces, mortgage insurance is not subject to provincial sales tax. However, three provinces charge PST on the mortgage insurance premium, and this amount cannot be added to the mortgage — it must be paid out of pocket at closing.
| Province | PST on Mortgage Insurance | PST on $15,000 Premium |
|---|---|---|
| Ontario | 8% | $1,200 |
| Quebec | 9% | $1,350 |
| Saskatchewan | 6% | $900 |
| All other provinces | 0% | $0 |
This is an often-overlooked cost. If you are buying a home in Ontario, Quebec, or Saskatchewan, make sure to budget for this PST amount in addition to your down payment and closing costs.
PST Example: Buying a $500,000 Home in Ontario With 5% Down
| Item | Amount |
|---|---|
| Home price | $500,000 |
| Down payment (5%) | $25,000 |
| Mortgage amount | $475,000 |
| Insurance premium (4.00%) | $19,000 |
| PST on insurance (8% × $19,000) | $1,520 |
| Total mortgage (including premium) | $494,000 |
| Cash required at closing (down payment + PST) | $26,520 |
How is Mortgage Default Insurance Paid?
The most common method for paying mortgage default insurance in Canada is to add the premium to your mortgage loan. This means the premium is amortized over the life of the mortgage and paid through your regular monthly payments.
For example, if your mortgage is $475,000 and the insurance premium is $19,000, your total mortgage becomes $494,000. You pay interest on the premium amount along with your mortgage principal.
You also have the option to pay the premium upfront at closing, which avoids paying interest on the insurance cost over the life of your mortgage. However, most buyers choose to add it to the mortgage to preserve their cash for down payment and closing costs.
Is Mortgage Insurance Worth It?
While mortgage insurance adds a cost to your home purchase, it provides several important benefits:
| Benefit | Explanation |
|---|---|
| Enables homeownership | Allows you to buy a home with as little as 5% down payment |
| Better mortgage rates | Insured mortgages typically qualify for lower interest rates because the lender’s risk is covered |
| Faster entry to the market | You do not need to save 20% of the home price, which can take years in expensive markets |
| Net savings on interest | The lower mortgage rate on an insured mortgage can partially or fully offset the insurance premium cost over the life of the loan |
Insured vs Uninsured Mortgage Rate Comparison
| Scenario | Down Payment | Mortgage Rate | Insurance Premium | Monthly Payment (25-yr, $500K home) |
|---|---|---|---|---|
| Insured (5% down) | $25,000 | 4.50% | $19,000 | $2,735 |
| Uninsured (20% down) | $100,000 | 4.80% | $0 | $2,306 |
While the insured mortgage has higher monthly payments (due to the larger loan), the lower interest rate partially offsets the insurance premium cost. The trade-off is entering the housing market sooner with less cash upfront.
Can You Cancel Mortgage Insurance?
Mortgage default insurance cannot be cancelled or refunded once your mortgage is funded, even if your home increases in value and your LTV drops below 80%. The premium is a one-time cost that covers the lender for the life of the original mortgage.
However, if you refinance your mortgage with a 20% or more equity position, the new mortgage will not require mortgage insurance. Keep in mind that refinancing comes with its own costs — use our mortgage refinance calculator to evaluate whether this makes sense.
Related Calculators
- Mortgage Calculator — Calculate your monthly mortgage payment
- Mortgage Affordability Calculator — See how much home you can afford
- Mortgage Down Payment Calculator — Calculate minimum down payment requirements
- Loan-to-Value Calculator — Calculate your LTV ratio
- Closing Costs Calculator — Estimate all costs of buying a home
- Mortgage Stress Test Calculator — See if you qualify at the stress test rate
- Land Transfer Tax Calculator — Calculate property purchase taxes by province
- Mortgage Refinance Calculator — Evaluate the cost and benefit of refinancing