CMHC Insurance Canada: Rates, Costs, and How to Minimize It
CMHC mortgage default insurance is mandatory for most Canadian buyers with less than a 20% down payment. It adds thousands of dollars to your mortgage balance — and yet most buyers don't fully understand how it's calculated, what it covers, or how to minimize it. This guide covers everything you need to know about CMHC insurance in Canada.
What Is CMHC Mortgage Default Insurance?
CMHC (Canada Mortgage and Housing Corporation) mortgage default insurance protects the lender, not the borrower, against default. If you stop making payments, CMHC pays the lender. You, the borrower, still owe the full debt (CMHC then pursues you for recovery).
Despite insuring the lender, you pay the premium. This seems counterintuitive, but it's the price of getting a mortgage with a low down payment. Without CMHC insurance, most lenders wouldn't offer mortgages to buyers with less than 20% down because the risk would be too high.
Who provides mortgage default insurance in Canada? Three insurers are approved: CMHC (federal crown corporation), Sagen (formerly Genworth Canada), and Canada Guaranty. Most people call all three "CMHC insurance" even if their specific insurer is Sagen or Canada Guaranty. The rates and rules are identical across all three.
When Is CMHC Insurance Required?
- Down payment is less than 20% of the purchase price
- Purchase price is below $1,500,000 (as of December 2024)
- Property is owner-occupied (principal residence)
- Amortization is 25 years or less (for insured mortgages)
- Mortgage is from a federally regulated lender
Note: Investment properties (rentals) are NOT eligible for CMHC insurance — you need 20%+ down on any investment purchase.
CMHC Premium Rates
The premium is a percentage of your mortgage amount (not the purchase price), based on your down payment percentage:
| Down Payment | LTV Ratio | CMHC Premium Rate | Premium on $400K Mortgage |
|---|---|---|---|
| 5% | 95% | 4.00% | $16,000 |
| 10% | 90% | 3.10% | $12,400 |
| 15% | 85% | 2.80% | $11,200 |
| 20% or more | ≤80% | None | $0 |
How CMHC Premium Is Calculated and Paid
The CMHC premium is added to your mortgage balance (not paid upfront in most cases). This means you pay it over the life of your mortgage with interest.
Example: $500,000 home, 10% down
Note: Most provinces also charge provincial sales tax (PST) on the CMHC premium at closing — this must be paid in cash, not added to the mortgage. Ontario charges 8% PST on CMHC premiums (~$1,116 on a $13,950 premium).
Tiered Down Payment Rules
For purchases between $500,000 and $999,999, the minimum down payment is not a flat percentage — it's tiered:
| Purchase Price Portion | Minimum Down Payment |
|---|---|
| First $500,000 | 5% |
| $500,001 to $999,999 (the portion above $500K) | 10% |
| $1,000,000 and above | 20% (no CMHC available) |
Minimum down on a $750,000 home:
5% × $500,000 = $25,000
10% × $250,000 = $25,000
Total minimum down: $50,000 (6.67% of $750K)
Strategies to Minimize or Avoid CMHC Insurance
1. Save 20% Down
The most direct path. On a $600,000 home, 20% down ($120,000) vs 10% down ($60,000) means $18,600 in CMHC savings — but you need an extra $60,000 upfront. The break-even point depends on how long it takes to save the extra 10%.
2. Use Gifted Down Payment Money
Family gifts can be used toward your down payment. A larger gift that pushes you to 20% eliminates CMHC insurance. Lenders require a gift letter confirming it's non-repayable.
3. Use the RRSP Home Buyers' Plan
First-time buyers can withdraw up to $35,000 per person ($70,000 per couple) from RRSPs tax-free under the Home Buyers' Plan. This can help bridge the gap to 20% down.
4. Buy Below $500,000
For a $499,000 home with 5% down, CMHC costs $18,960. At the same down payment percentage on a $420,000 home, CMHC costs $15,960. Buying slightly below major price thresholds can save meaningfully.
Frequently Asked Questions
Does CMHC insurance protect me if I lose my job?
No. CMHC insurance protects the lender against your default — it does not provide any protection to you. If you lose your job and can't make payments, CMHC may step in to pay the lender, but you still owe the full mortgage debt. CMHC may pursue you for recovery. This is a common misconception.
Can I get a refund on CMHC insurance if I pay off my mortgage early?
No. The CMHC premium is a one-time fee (added to your mortgage at origination). If you pay off your mortgage in year 10 instead of year 25, you don't receive a refund of the unused portion of the premium.
Is CMHC insurance deductible on my taxes?
For a principal residence, CMHC insurance is not tax-deductible. For investment properties (though CMHC is not available for investment purchases, if it were), it would be added to the adjusted cost base rather than directly deductible against income.
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