The short answer
Mortgage default insurance protects the lender if a borrower cannot repay. It is generally required when the down payment is below 20%. It is different from home insurance and mortgage life insurance.
Government of Canada: down payments and mortgage insuranceCommon insurance trigger
Lender and insurer eligibility still determine approval.
Part of the borrowing cost
Ask whether it is paid upfront or added to the loan.
High-ratio CMHC purchase limit
CMHC’s current purchase sheet sets this limit for loans above 80% loan-to-value.
The basics
What the premium actually buys
Mortgage default insurance, also called mortgage loan insurance, protects the lender if you stop paying. The Government of Canada is clear that it does not protect you. CMHC is one insurer that provides it, and your lender arranges it when you apply.
The cost is a premium. CMHC says lenders pay it and typically pass it on to you. The Government of Canada says you can add it to your mortgage or pay it as a lump sum up front. If you add it, you pay interest on it at your mortgage rate.
The premium is a percentage of the loan, set by the loan-to-value ratio, or LTV. LTV is the loan divided by the home’s value. A smaller down payment means a higher LTV and a higher premium rate.
Why it matters
It sets your price ceiling and your amortization
CMHC’s purchase rules say an insured loan above 80% LTV needs a purchase price under $1,500,000. At $1,500,000 or more, the Government of Canada says the minimum down payment is 20%, so this type of insurance is no longer the route.
Amortization is the total years to pay off the loan. CMHC’s maximum is 25 years, or 30 years when LTV is above 80% and you are a first-time buyer or buying a newly built home. Finance Canada says this applies to insurance applications submitted from December 15, 2024.
How it works
From down payment to insured loan
Work out your minimum down payment
Use our down payment calculator. It follows the Government of Canada’s tiers: 5% of the first $500,000, plus 10% of the portion from $500,000 to $1.5 million.
Calculate your LTV
Divide the base mortgage by the purchase price. The result places you in a premium band.
Find your premium band
CMHC’s rates on the total loan: up to 65% LTV, 0.60%; 65.01% to 75%, 1.70%; 75.01% to 80%, 2.40%; 80.01% to 85%, 2.80%; 85.01% to 90%, 3.10%; 90.01% to 95%, 4.00%.
Decide how to pay the premium
Adding it to the loan keeps cash in hand but adds interest for the full amortization. Paying up front costs more cash now.
Check the debt-service limits
CMHC caps GDS at 39% and TDS at 44%. GDS is housing costs as a share of income; TDS adds your other debts. Both are tested at the greater of your rate plus 2% or 5.25%.
Document your down payment
CMHC lists savings, the sale of a property, or a non-repayable gift from a relative as traditional down payment sources. Keep the paper trail ready for your lender.
Avoid these
Costly insurance assumptions
Confusing it with life or home insurance
Default insurance pays the lender, not you or your family. Arrange property coverage and any life coverage separately.
Ignoring the band edges
Premium rates step up between LTV bands. A slightly larger down payment can move you into a lower band, so run both numbers.
Overlooking the credit score floor
CMHC requires at least one borrower or guarantor with a credit score of 600. It may consider other ways to show creditworthiness for newcomers or recent graduates.
Shopping right under $1.5 million
At $1,500,000 or more, the 20% minimum applies. A bidding situation that pushes the price up can change your whole financing plan.
Example
The premium on an $800,000 purchase
This continues the article’s example above, using CMHC’s published premium table. It is an illustration; your lender gives the exact premium.
| Base mortgage before premium | $745,000 |
|---|---|
| LTV: $745,000 ÷ $800,000 | 93.125% |
| Premium band: 90.01% to 95% | 4.00% |
| Premium: $745,000 × 4.00% | $29,800 |
| Insured mortgage if the premium is added | $745,000 + $29,800 = $774,800 |
Interest would then be charged on $774,800. Your lender confirms which insurer and premium apply. Closing costs are not included.
Questions to ask
Questions for your financing
Your lender or mortgage broker
- Which insurer will you use, and what premium rate applies to my LTV?
- Will the premium be added to the loan or paid up front?
- Do I qualify for a 30-year amortization as a first-time or new-build buyer?
- What qualifying rate are you using for my GDS and TDS?
Yourself, before you shop
- What price keeps my LTV out of a higher premium band?
- How much cash is left after the down payment and closing costs?
- Can I show where every dollar of my down payment came from?
FAQ
Common questions
Is mortgage default insurance the same as CMHC insurance?
CMHC is one insurer offering mortgage loan insurance. Your lender arranges the insurance and gives you the exact price when you apply. Either way, it protects the lender, not you.
How much is the CMHC premium?
CMHC lists premiums by LTV, from 0.60% of the loan at up to 65% LTV to 4.00% at 90.01% to 95%. A 4.50% rate applies in the top band with a non-traditional down payment.
What is the maximum price for an insured mortgage?
CMHC’s purchase rules say the price must be under $1,500,000 when LTV is above 80%. At $1.5 million or more, the Government of Canada says the minimum down payment is 20%.
Can first-time buyers get a 30-year amortization?
Yes, on an insured mortgage above 80% LTV. CMHC allows 30 years for first-time buyers and buyers of newly built homes. Otherwise its maximum is 25 years.
Does meeting the minimum down payment mean I will be approved?
No. CMHC also looks at credit, debt-service ratios and the property, which must be suitable for full-time, year-round occupancy. Our pre-approval guide helps you prepare.
