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Mortgage Default Insurance (CMHC Insurance)

Content last updated: April 10, 2022

CMHC insurance is mandatory for down payments less than 20% of the purchase price. CMHC mortgage default insurance protects lenders in the event the borrower stops paying their loan. The borrower pays for these premiums up front.

Thanks to mortgage default insurance, Canadians can purchase homes they might not otherwise be able to afford. Rates start at 2.8%. Although that’s quite a lot, it allows us a shot at the Canadian market we may not have had before. Without it, interest rates would be much higher and can potentially result in much higher risk of loans not being paid back. This risk can be cut down by mortgage default insurance which allows lenders to offer lower interest rates and provide mortgages without worrying about the loan not getting paid back.

Mortgage default insurance calculator

Here’s a calculator for figuring out how much CMHC mortgage insurance might cost. If you enter an asking price ($) and the down payment (%) of your house, it will estimate the cost of the insurance premium ($).

Asking Price

 Go
 STEP 1
Enter the price of the home you're interested in and press GO.
Down payment        Down payment The amount of money you pay up front to obtain a mortgage. The minimum down payment in Canada is 5%. For down payments of less than 20%, home buyers are required to purchase mortgage default insurance, commonly referred to as CMHC insurance.
minus
Amortization period        Amortization period The length of time it will take a homeowner to pay off his/her mortgage. In Canada, the maximum amortization period for insurable mortgages is 25 years. Longer amortization periods allow homeowners to make smaller monthly payments, but equate to more interest paid over the life of the mortgage.  
 
STEP 2
Choose an amortization period.
Mortgage insurance        Mortgage insurance Mortgage default insurance, commonly referred to as CMHC insurance, protects the lender in the case the borrower defaults on the mortgage. Mortgage default insurance is required on all mortgages with down payments of less than 20%, which are known as high ratio mortgages. Mortgage default insurance is calculated as a percentage applied to your mortgage amount. plus
Total Mortgage Required equals $- $- $- $-

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Who offers mortgage default insurance?

There are three insurance providers in Canada that provide default mortgage protection: The Canada Mortgage and Housing Corporation (CMHC), Genworth Financial, and Canada Guaranty.

Qualifying for mortgage default insurance

This is about the details of how to get mortgage default insurance.

  • The maximum amortization for insured mortgages is 25 years.

  • For purchases with a purchase price between $500,000 – $999,999 the down payment is higher. Minimum down payment starts at 5% of the first 500K and goes up to 10% from there on out.

  • Mortgage default insurance is not available for high-value homes $1 million and above. This means that you need to put down a full 20% in order to get the house.

There is a lot of paperwork required to be eligible for CMHC (Canada Mortgage and Housing Corporation) coverage. These requirements went into place on July 1, 2020 in response to the economy taking a dip. To be eligible for CMHC insurance after that date, borrowers must:

  • You should aim to have a gross debt service ratio of less than 35

  • The percentage of your income that goes towards outgoings and debt repayments should not exceed 42%

  • If you have a credit score of at least 680

  • You should not borrow money for your down payment

How Much Does Mortgage Insurance Cost (CMHC insurance rates)**

To figure out what your mortgage default insurance premium is, the first step is to calculate how much you have for a down payment. For example, if your home is worth $200,000, you should have at least $10,000 (5%) as a down payment to get that percentage of your home. The chart below outlines the premium rates for each down payment situation:

Loan-to-ValuePremium on Total LoanPremium on Increase to Loan Amount for Portability
*Up to and including 65%0.60%0.60%
*Up to and including 75%1.70%5.90%
*Up to and including 80%2.40%6.05%
Up to and including 85%2.80%6.20%
Up to and including 90%3.10%6.25%
Up to and including 95%4.00%6.30%

*Down payments for these mortgages are greater than 20%. But rest assured that you’ll normally get a mortgage from the bank with unprotected insurance. However, bank have the option to purchase CMHC insurance anyway.

These three providers charge the same rates: CMHC, Genworth and Canada Guaranty. As these provinces have provincial sales tax, please be aware of how much tax you will need to pay when calculating how much your premiums should you live in Ontario, Manitoba, Quebec and Saskatchewan. It is not permissible to add the PST to your mortgage, so this is a closing cost that needs to be paid upfront.

How do you pay mortgage default insurance?

Mortgage default insurance is provided with your mortgage and you wont have to finance it upfront like the closing costs such as legal fees and land transfer tax. Instead, your mortgage default insurance premium is tacked on to the life of your loan and paid off in proportion to its duration, also known as the amortization period.

How to minimize mortgage default insurance

The only way to decrease the amount you pay in mortgage default insurance is by increasing your down payment relative to your home’s purchase price. To pay for your new home, you need to either save up more money or purchase a less expensive place to live. When considering your down payment, consider additional sources such as a gift money from a family member or, if you’re a first-time homebuyer, using money from your RRSP Home Buyers Plan.

Note that under the changes to CMHC that were fully implemented on July 1st, 2020, you won’t qualify for CMHC coverage if you borrow money for a down payment. That being said, if provide enough down payment that would cover more than 20% of the purchase price then you will not be required to carry CMHC insurance.