CMHC mortgage loan insurance explained: coverage, premiums and down payments

CMHC mortgage loan insurance, also called mortgage default insurance, is required in Canada when a homebuyer makes a down payment of less than 20% of the home’s purchase price. This insurance protects lenders if a borrower can’t make their mortgage payments. It also helps more people qualify for a mortgage by allowing them to buy a home with a smaller down payment.

Whether you're buying your first home or refinancing an existing mortgage, understanding CMHC mortgage loan insurance and premium costs is important.

What is CMHC mortgage loan insurance?

Mortgage loan insurance is an insurance policy that protects the lender — not the buyer — if the borrower stops paying the mortgage. In return, it allows buyers to make a smaller down payment (as low as 5%) and still qualify for a mortgage.

You must get this insurance if your down payment is less than 20% of the home's purchase price.

What is a mortgage loan insurance premium?

The mortgage loan insurance premium is the cost of the insurance. This is paid by the lender and often passed on to the borrower. You can pay the insurance premium in full at the time of purchase, or it can be added to your mortgage.

The premium is based on the size of your down payment and your loan amount. The smaller your down payment, the higher the premium rate.

Premium rates range from 0.6% to 4.5% of the total mortgage amount.

Do you need CMHC mortgage loan insurance?

Use the guide below to see if you’ll need it:

You need CMHC mortgage loan insurance if:

• Your down payment is less than 20% of the home’s purchase price and the home price is $1.5 million or less.
• Your loan-to-value ratio (LTV) is more than 80%.

You don’t need it if:

• You put down 20% or more of the home’s price.
• The home price is over $1.5 million (you’re not eligible for this insurance).

Down payment rules for homes under $1.5 million

For homes $500,000 or less:

• Minimum 5% down payment is required.

For homes between $500,000 and $1,499,999:

• 5% on the first $500,000, plus
• 10% on any amount over $500,000.

Homes $1.5 million or more require a minimum down payment of 20%, and CMHC insurance is not available.

Example: Do you need mortgage loan insurance?

Let’s say you want to buy a home that costs $750,000 and you have $60,000 saved.

Here's how your required down payment breaks down:

• 5% of $500,000 = $25,000
• 10% of $250,000 = $25,000
• Total required = $50,000

You would have enough savings to meet the down payment requirements, but it is still less than 20% so you will still need mortgage loan insurance.

Your $60,000 down payment represents a down payment of 8% which means you will pay a premium of 4% or $27,600 which can be added to your mortgage amount or paid separately.

Here’s how the premium is calculated:

• Purchase price $750,000 – down payment $60,000 = $690,000
• Mortgage amount $690,000 x premium rate of 4% = $27,600

Try the CMHC Mortgage Loan Insurance Premium Calculator

Want to know how much your premium will be? Use the CMHC premium calculator to get an accurate estimate based on your home price and down payment amount.