Mortgage Insurance Canada:
Less Than 20% Down
📅 Date: July 19, 2024
Mortgage insurance in Canada is mandatory if your down payment is under 20%. Whether you’re a first-time buyer or upgrading, it’s important to know how this impacts your loan, your monthly costs, and your approval chances.
Mortgage Insurance
Mortgage default insurance (also called CMHC insurance) protects the lender — not the buyer — in case you stop making payments. It’s a requirement on high-ratio mortgages, meaning any mortgage where the down payment is less than 20% of the purchase price.
Who Needs Mortgage Insurance in Canada?
You must have mortgage insurance if:
➤ Your down payment is less than 20%
➤ The property is under $1,000,000
➤ You’re buying a primary residence (not a rental or investment)
If the home costs over $1M, you must put 20%+ down — and insurance is not an option.
How Much Does It Cost?
The mortgage insurance premium depends on the size of your down payment:
| Down Payment Range | Insurance Premium |
|---|---|
| 5% – 9.99% | 4.00% of mortgage |
| 10% – 14.99% | 3.10% |
| 15% – 19.99% | 2.80% |
Pros and Cons of Mortgage Insurance
Benefits:
➤ Allows buyers to purchase sooner with less saved up
➤ Offers access to better mortgage rates
➤ Required by default for most first-time buyers
Downsides:
➤ Increases your total loan amount
➤ Adds interest over the long term
➤ Only benefits the lender, not you
Smart Ways to Manage Mortgage Insurance
🔍 Use a mortgage broker to explore all lender options (some may offer better premiums)
💰 Increase your down payment slightly — even going from 9.99% to 10% drops your premium
📉 Watch your debt ratios — insurance approval also depends on your income, credit, and other debts
Example Breakdown
Let’s say you’re buying a $600,000 home with 10% down:
Down payment: $60,000
Mortgage amount: $540,000
Insurance premium (3.10%): $16,740
New mortgage: $556,740
That premium is rolled into your mortgage and paid off over your amortization period.
Final Thoughts
If you’re buying a home with less than 20% down, mortgage insurance in Canada isn’t optional — it’s part of the deal. But understanding how it works and planning for it smartly can help you qualify smoothly, save money, and avoid surprises at closing.