What Is CMHC Mortgage Insurance?
In Canada, if you buy a home with a down payment of less than 20%, you are required by law to purchase mortgage default insurance. The most common provider is the Canada Mortgage and Housing Corporation (CMHC), a federal Crown corporation. Two private alternatives, Sagen (formerly Genworth) and Canada Guaranty, also offer the same product.
Despite the name, this insurance protects the lender, not you. If you stop making payments and the bank has to sell your home at a loss, the insurance covers their shortfall. But in practice, it allows you to buy a home with as little as 5% down, which otherwise wouldn't be possible.
How Much Does It Cost?
The premium is calculated as a percentage of your insured mortgage amount (purchase price minus your down payment). The rates in 2026 are:
| Down Payment | Premium Rate | |---|---| | 5% to 9.99% | 4.00% | | 10% to 14.99% | 3.10% | | 15% to 19.99% | 2.80% |
Ottawa example: You buy a home for $550,000 with 10% down ($55,000). Your insured mortgage is $495,000. At a 3.10% premium rate, CMHC insurance costs $15,345.
This amount is not paid upfront in cash, it's added to your mortgage balance and paid off over the life of your amortization. On a 25-year mortgage, it adds roughly $80–90/month to your payment.
Note: You also pay PST (provincial sales tax) on the premium: in Ontario, that's 8% of the premium amount, paid at closing. On the example above, that's $1,228 due at closing.
When Do You NOT Need CMHC Insurance?
You avoid CMHC insurance entirely if:
- Your down payment is 20% or more
- The purchase price is over $1.5 million (CMHC insured mortgages are capped at $1.5M, above this, 20% down is required)
- You are buying a home for rental-only purposes with the property as your primary business
The 30-Year Amortization Rule
As of August 2024, first-time buyers and buyers of new construction can access 30-year amortization on insured mortgages (previously limited to 25 years). This reduces monthly payments but increases total interest paid. It's a tradeoff worth modeling out with a broker.
Is CMHC Insurance a Bad Thing?
Many newcomers to Canada are surprised that they're required to pay an insurance premium that benefits the bank, not them. It can feel unfair.
The practical reality: CMHC insurance is what makes low-down-payment home buying possible in Canada. Without it, banks would require 20%+ down for all buyers. In Ottawa, where a starter condo runs $400,000–$500,000, saving 20% ($80,000–$100,000) can take years longer than saving 5% ($20,000–$25,000).
For many newcomers, CMHC insurance is the tool that gets them into the Ottawa housing market 3–5 years earlier than they otherwise could.
Tips
- Get to 10% down if possible: The jump from 4.00% to 3.10% premium (going from 5% to 10% down) saves a meaningful amount, worth the extra saving time if you can manage it.
- Budget for the PST separately: It's due at closing, not rolled into the mortgage.
- Shop rates even with CMHC: Being an insured borrower actually gives lenders more flexibility to offer competitive rates, since their risk is protected.
