Updated: April 2025 | bremo.io financial guides

CMHC Mortgage Insurance — What It Costs and How to Avoid It

If you buy a home in Canada with less than a 20% down payment, you must pay for mortgage default insurance — commonly called CMHC insurance. This insurance protects the lender (not you) if you default on your mortgage. Understanding how it works and what it costs is essential for any Canadian homebuyer.

What Is CMHC Insurance?

CMHC stands for Canada Mortgage and Housing Corporation, the federal Crown corporation that insures the largest share of Canadian high-ratio mortgages. Two private insurers also provide this coverage: Sagen (formerly Genworth Canada) and Canada Guaranty.

Mortgage default insurance is required by law when your down payment is less than 20% of the purchase price. It allows lenders to offer mortgages to borrowers with smaller down payments, knowing they're protected if the borrower defaults.

Key distinction: Mortgage insurance protects the lender, not you. If you default and the lender takes a loss, the insurer compensates the lender. The insurer may then pursue you for repayment of the loss.

When Is CMHC Insurance Required?

Down payment is less than 20% of the purchase price
Home purchase price is under $1,500,000 (homes over $1.5M are ineligible for insured mortgages)
Property is owner-occupied (your principal residence)

CMHC insurance is not available for rental properties or homes over $1,500,000. If you're buying a property over $1M, you must have a 20% down payment minimum.

CMHC Premium Rates (2025)

Loan-to-Value Ratio	Down Payment	CMHC Premium
Up to 95% LTV	5% down	4.00% of mortgage amount
90.01% to 95% LTV	5–9.99% down	4.00%
85.01% to 90% LTV	10–14.99% down	3.10%
80.01% to 85% LTV	15–19.99% down	2.80%

The premium is added to your mortgage balance and repaid over the amortization period. You also pay provincial sales tax on the premium in some provinces (Ontario, Manitoba, Quebec, Saskatchewan) — this tax must be paid upfront, not added to the mortgage.

Real Cost Examples

Example 1: $500,000 home, 5% down

Down payment: $25,000
Mortgage: $475,000
CMHC premium: $475,000 × 4.00% = $19,000
Total mortgage: $494,000

Example 2: $600,000 home, 10% down

Down payment: $60,000
Mortgage: $540,000
CMHC premium: $540,000 × 3.10% = $16,740
Total mortgage: $556,740

How to Avoid CMHC Insurance

The only way to avoid mortgage default insurance is to have a down payment of 20% or more. On a $600,000 home, that means $120,000 down.

Ways Canadians build toward 20%:

Save aggressively using a FHSA (First Home Savings Account — new in 2023) for tax-deductible, tax-free savings
Use an RRSP through the Home Buyers' Plan (withdraw up to $35,000 per person, repaid over 15 years)
Accept a gifted down payment from immediate family members
Wait longer and save more before buying
Buy a lower-priced property where 20% is achievable

Is CMHC Insurance Always Bad?

CMHC insurance has a cost, but it also enables homeownership earlier. Consider: if it takes you 3 additional years to save a 20% down payment, you miss out on 3 years of potential property appreciation. In markets with strong price growth, the CMHC premium can be much smaller than the cost of waiting. In flat or declining markets, saving longer and avoiding the premium makes more sense.

The $1M+ rule: Homes priced at $1 million or more cannot have insured mortgages. You must have at least 20% down. As more Canadian markets push average prices past $1M, this rule affects a growing number of buyers.

CMHC vs. Sagen vs. Canada Guaranty

All three insurers offer comparable coverage and premiums. Your lender decides which insurer to use — you don't choose. The premium rates are the same across all three. For borrowers, the practical difference is minimal.

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