Introduction

When purchasing a home in Canada, your down payment amount determines whether you need to buy mortgage default insurance. This insurance is commonly referred to as CMHC insurance (offered by the Canada Mortgage and Housing Corporation, as well as private providers like Sagen and Canada Guaranty).

CMHC insurance protects the lender in case you default on your mortgage payments.

In this guide, we cover how CMHC insurance is calculated and how to avoid paying it. You can model your home payments with our Mortgage & Stress Test Calculator.

When is CMHC Insurance Mandatory?

In Canada, mortgage default insurance is mandatory for high-ratio mortgages—which are loans where your down payment is less than 20% of the purchase price.

• Minimum Down Payment: You must put down at least 5% on the first $500,000 of the purchase price, and 10$500,000.
• Uninsured Threshold: If your down payment is 20% or more, you have a low-ratio mortgage and do not need to pay for CMHC insurance.
• $1 Million Limit**: Homes valued at **$1 million or more are not eligible for CMHC insurance. This means you must put down a minimum 20% down payment to purchase these properties.

How Much Does CMHC Insurance Cost?

The cost of CMHC insurance is calculated as a percentage of your total mortgage loan amount, scaling based on your down payment percentage:

Note: The premium is added directly to your mortgage loan principal—you do not have to pay for it in cash on closing day.

Conclusion

While CMHC insurance allows you to buy a home with as little as a 5% down payment, it adds thousands to your total loan. Saving up a 20% down payment is the best way to avoid this expense.

To calculate your monthly payments and evaluate stress test scenarios, use the Mortgage & Stress Test Calculator.