Mortgage default insurance, often called CMHC insurance after the largest provider, protects the lender if you stop paying. You pay for it, but it is what allows buyers with smaller down payments to qualify. Here is how the premium works.
Premium rates by down payment
| Down payment | Loan-to-value | Standard premium |
|---|---|---|
| 5% to 9.99% | 90.01% to 95% | 4.00% |
| 10% to 14.99% | 85.01% to 90% | 3.10% |
| 15% to 19.99% | 80.01% to 85% | 2.80% |
| 20% or more | 80% or less | Not required |
Premiums can change, and insurers may charge more for some situations. Confirm with your lender or insurer. Insurers include CMHC, Sagen and Canada Guaranty.
An example
You buy a $650,000 home with $65,000 down (10%). Your mortgage is $585,000, and the loan-to-value is 90%. At a 3.10% premium, the insurance costs $18,135, which is normally added to the mortgage for a total of $603,135. You can see this calculation in our mortgage calculator.
Ontario sales tax on the premium
In Ontario, provincial sales tax applies to the premium. It cannot be added to the mortgage and must be paid in cash at closing. Include it in your closing costs budget.
Who needs it, and who does not
- Required: Down payment below 20% on a home priced under $1.5 million.
- Not available: Homes priced at $1.5 million or more need at least 20% down.
- Insurable and uninsured mortgages: Some mortgages with 20% or more down can be insured by the lender at their own cost, which can lead to lower rates.
Ways to reduce the cost
- Increase your down payment to the next tier, for example from 9% to 10%.
- Use a 25-year amortization if the surcharge for 30 years applies.
- Ask a broker whether a different lender or product changes your total cost.
Frequently asked questions
Does default insurance protect me?
No. It protects the lender. It does not cover your payments if you lose your job. Consider separate life or disability insurance if you need that protection.
Can I get the premium back?
Generally no, although some insurers allow you to transfer a premium to a new insured mortgage under certain conditions.
Is the premium tax-deductible?
For most homeowners, no. Speak to a tax professional about your situation.
See what your premium and payment could look like
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Get matched nowImportant: Ottawa Mortgages is an independent information and referral service. We are not a lender, mortgage broker or mortgage brokerage, and we do not give mortgage advice or make credit decisions. If you ask to be connected, your details may be shared with a licensed Ontario mortgage professional, who may compensate us. Rates, rules and eligibility change often. Confirm details with a licensed professional and official sources, and check any Ontario mortgage broker’s licence with FSRA. Read our full disclosure.