Understand mortgage default insurance - what it is, when you need it, how much it costs, and strategies to avoid or reduce this expense on your Canadian home purchase.
Mortgage default insurance (often called CMHC insurance) protects your lender if you default on your mortgage. It allows lenders to offer mortgages to buyers with less than 20% down payment, making homeownership more accessible.
Important: This insurance protects the LENDER, not you. If you default, the insurer pays your lender, and you could still lose your home.
Mortgage default insurance is mandatory when your down payment is less than 20% of the purchase price. This applies to all Canadians purchasing homes under $1 million.
Largest and most well-known insurer, government-owned
Formerly Genworth Canada, second largest private insurer
Third major private insurer, known for fast approvals
Premiums are calculated as a percentage of your mortgage amount:
| Down Payment | Premium on Purchase Price | Premium on Mortgage Amount |
|---|---|---|
| 5% - 9.99% | 4.00% | 4.20% |
| 10% - 14.99% | 3.00% | 3.10% |
| 15% - 19.99% | 2.00% | 2.40% |
| 20% or more | 0% | Not Required |
For a $500,000 home with 10% down ($50,000):
Putting down 20% or more means no insurance required. Even 15-19% reduces costs significantly.
Parents or family can gift you money for your down payment. Must be a gift, not a loan.
A co-borrower's income can increase your budget, allowing for a larger down payment.
Withdraw up to $60,000 from RRSPs (tax-free) using the HBP to boost your down payment.
Yes! You can add the insurance premium to your mortgage, spreading the cost over your amortization. However, this means you'll pay interest on that amount for years.
$13,500 premium added to mortgage at 5.24% over 25 years:
Total cost with interest: ~$24,000. Better to pay upfront if possible.
Our mortgage experts can help you understand all the costs of buying a home, including insurance, and find the best financing solution.
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