Insured vs Conventional Mortgage Canada

Two fundamentally different mortgage categories in Canada — what separates them and how to choose.

The Two Categories: A Side-by-Side View

Factor	Insured Mortgage	Conventional Mortgage
Down payment	5%–19.99%	20%+
CMHC premium	2.80%–4.00% of mortgage	None
Max purchase price	$1,499,999	No cap
Max amortization	25 years (30 for first-time/new build)	30 years
Mortgage rate	Often slightly lower	Often slightly higher
Lender risk	Protected by insurer	Lender bears full risk
Refinancing eligibility	Not eligible for CMHC reinsurance	Full refinancing access

Why Insured Mortgages Sometimes Have Lower Rates

This surprises many buyers: despite paying a CMHC premium, insured mortgage rates are often 0.10–0.20% lower than conventional mortgage rates for the same term. The reason is that CMHC insurance eliminates the lender's credit risk entirely. The lender knows they will be made whole if you default, so they charge a lower rate for the reduced risk. The insurer takes on the risk and charges you the premium for doing so.

This rate differential is often not enough to fully offset the CMHC premium cost, but it partially reduces the net cost of carrying insurance.

There Is Also a Third Category: Insurable

A lesser-known middle category exists in Canadian mortgage terminology: "insurable" mortgages. These are mortgages that meet the eligibility criteria for CMHC insurance (purchase price under $1.5M, amortization under 25 years, owner-occupied) but where the borrower has chosen to put 20%+ down. The lender may still insure these mortgages in bulk with the insurer — at the lender's cost — to reduce their regulatory capital requirements. Insurable mortgages often qualify for rates similar to insured mortgages.

Key Restrictions on Insured Mortgages

• Maximum purchase price: $1,499,999 (homes at $1.5M+ require 20% down — no insurance available)
• Cannot be used for refinancing — CMHC insurance only applies at original purchase
• Cannot be used for investment/rental properties (unless owner-occupied multi-unit)
• Maximum amortization of 25 years (with limited exceptions for first-time buyers of new construction)
• Must be for primary or secondary residence in Canada

The $1.5M Threshold Change (December 2024)

As of December 15, 2024, the federal government raised the maximum purchase price for insured mortgages from $1,000,000 to $1,499,999. This was a significant change that opened up CMHC insurance to buyers in Vancouver and Toronto who were previously shut out of the insured market simply due to high local prices. Buyers purchasing a $1.2M home can now qualify with as little as 5% on the first $500K and 10% on the remaining $700K — a minimum down payment of approximately $95,000 instead of the previous $240,000 (20%) requirement.

Conventional Mortgage Advantages

• No CMHC premium — significant upfront savings
• 30-year amortization available without restriction
• Refinancing available up to 80% LTV
• More lender options including some that only do conventional lending
• No purchase price cap
• Better terms for investment property and rental income qualification

Which Should You Choose?

The choice is largely driven by how much down payment you have. If you have less than 20%, insured is your only option. If you have exactly 20% and the math works, conventional is almost always better due to eliminating the CMHC premium cost. The break-even on saving an extra 15% down payment to reach 20% versus buying with 5% and paying insurance takes approximately 7–12 years depending on your market and rate assumptions.

In high-cost markets like Toronto or Vancouver, reaching 20% down can take many additional years — during which time prices may continue rising. Many financial advisors in these markets recommend buying sooner with less down and paying the insurance rather than waiting years more to save the full 20%.