Short answer: if your down payment is less than 20% of the purchase price, your mortgage is considered "high-ratio," and by law it must be insured against default. The insurance premium, commonly called "CMHC insurance," is calculated as a percentage of your mortgage amount and is almost always added to your mortgage balance rather than paid upfront.
Who Actually Provides It
Three companies insure high-ratio mortgages in Canada: CMHC (a federal Crown corporation), Sagen (formerly Genworth Canada), and Canada Guaranty. Your lender chooses which insurer to use, and the premium rates are essentially standardized across all three. The insurance protects the lender if you default, not you, but it's what makes it possible for buyers with less than 20% down to get a mortgage in the first place.
What It Actually Costs
The premium is a percentage of your mortgage amount, based on your down payment size:
- 5% to 9.99% down: 4.00% premium
- 10% to 14.99% down: 3.10% premium
- 15% to 19.99% down: 2.80% premium
On a $500,000 purchase with 5% down ($25,000), your mortgage amount before insurance is $475,000. At the 4.00% premium rate, that's a $19,000 insurance premium, added to your mortgage balance for a total of $494,000. You don't write a separate cheque for it, but you do pay interest on it for the life of your mortgage, which is worth factoring into your decision if you're weighing a larger down payment.
Do You Pay Sales Tax on It Too?
In Ontario, no. Some provinces, including Quebec, Saskatchewan, and Manitoba, charge provincial sales tax on the insurance premium itself, due in cash at closing rather than added to your mortgage. Ontario doesn't add PST on top, so your only cost is the premium rolled into your mortgage balance.
How to Avoid It Entirely
The only way to avoid mortgage default insurance is to put down 20% or more, making your mortgage "conventional" instead of high-ratio. There's no insurance premium on a conventional mortgage, though you'll need a larger amount saved before closing. For a lot of first-time buyers, insured financing is what makes buying possible years earlier than waiting to save a full 20%, so it's worth weighing the cost of the premium against the cost of waiting.
Buying With Less Than 20% Down?
We'll show you exactly what the premium adds to your mortgage and payment before you commit to a purchase price. Get a real number, not an estimate.