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Mortgage Insurance in Canada: What You Need to Know Before You Buy

Mortgage Insurance in Canada: What You Need to Know Before You Buy

Published on June 17, 2025 | By WealthFusions Finance Team

Mortgage Insurance in Canada: What You Need to Know Before You Buy

What is Mortgage Insurance?

Mortgage insurance is a policy that protects the lender in case the borrower defaults on their mortgage loan. It is **typically mandatory** if your down payment is **less than 20%** of the purchase price.

🔍 Also known as: Mortgage Default Insurance

When Is It Required?

  • When your down payment is between **5% and 19.99%**
  • For homes valued **under $1,000,000**
  • Offered by CMHC, Sagen, or Canada Guaranty

How Much Does It Cost?

The premium is a percentage of the mortgage amount and depends on your down payment:

Down PaymentPremium (% of mortgage)
5% – 9.99%4.00%
10% – 14.99%3.10%
15% – 19.99%2.80%
20% or moreNot required

How Is It Paid?

  • Usually **added to your mortgage balance** and repaid over time
  • Can also be paid upfront (optional)

Who Offers It?

  • CMHC (Canada Mortgage and Housing Corporation) – Government-backed
  • Sagen (formerly Genworth Canada)
  • Canada Guaranty
đź’ˇ Tip: A larger down payment reduces or eliminates the insurance premium and lowers your monthly payments.

Buying a home is one of the biggest investments you’ll make, and understanding mortgage insurance in Canada is key to protecting your property and family. Whether you’re a first-time homebuyer or refinancing, mortgage insurance affects your monthly payments, costs, and financial security. This guide explains the types of mortgage insurance, who needs it, how much it costs, and when it makes sense — supported by up-to-date Canadian data and real-world examples.

1. What is Mortgage Insurance?

Mortgage insurance protects lenders in case borrowers default on their loans. In Canada, it’s mandatory if your down payment is less than 20% of the purchase price. It helps buyers qualify for mortgages with lower down payments but adds to your total cost.

Key point: Mortgage insurance protects the lender—not the borrower or your family.

2. Types of Mortgage Insurance in Canada

TypeWho Provides It?Who It ProtectsWhen It’s RequiredTypical Cost
CMHC InsuranceCanada Mortgage and Housing Corporation (Government-backed)LenderDown payment < 20%1.80% – 4.50% of mortgage amount (added to loan or upfront)
Genworth CanadaPrivate InsurerLenderDown payment < 20%Similar to CMHC, varies with down payment and loan size
Canada GuarantyPrivate InsurerLenderDown payment < 20%Comparable to CMHC rates
Private Mortgage Insurance (PMI)Private companies (rare in Canada)LenderRarely used in Canada, more common in USVaries widely

3. How Much Does Mortgage Insurance Cost?

Mortgage insurance premiums vary based on your down payment size and mortgage amount. Here’s an example for a $400,000 home:

Down Payment %Premium RatePremium AmountAdded to MortgageMonthly Increase (over 25 years)
5%4.50%$17,100Yes~$76
10%3.10%$9,880Yes~$44
15%2.80%$7,840Yes~$35

Note: Adding the premium to your mortgage increases your principal and interest payments.

4. When is Mortgage Insurance Mandatory?

If your down payment is less than 20%, mortgage insurance is legally required for all Canadian mortgages through federally regulated lenders. This protects lenders and allows you to purchase a home with as little as 5% down.

Example: A buyer with a $500,000 home and 10% down must pay mortgage insurance, but a buyer with 25% down can avoid it.

5. Benefits of Mortgage Insurance

  • Lower Down Payment: Buy a home sooner without saving 20%.
  • Access to Better Interest Rates: Insured mortgages often qualify for lower rates.
  • Supports Affordable Housing: Government programs make home ownership accessible.

6. Downsides and Considerations

  • Added Cost: Premiums add thousands to your mortgage.
  • No Protection for You: Insurance only protects the lender.
  • Long-term Impact: Increases total interest paid over life of mortgage.

7. Can You Cancel Mortgage Insurance?

Yes, if you reduce your mortgage balance below 80% loan-to-value through payments or home appreciation, you may request cancellation of mortgage insurance, reducing your monthly costs.

8. Alternatives to Mortgage Insurance

If you want to avoid mortgage insurance, consider:

  • Saving a 20% or higher down payment.
  • Using a co-signer or guarantor in some cases.
  • Exploring private lenders with different requirements (often at higher interest rates).

Summary & Next Steps

Mortgage insurance is a necessary cost for many Canadian homebuyers but understanding its types, costs, and benefits helps you make informed decisions. By carefully planning your down payment and comparing insurance providers, you can minimize costs and protect your financial future.

Contact to explore your best options and get personalized advice for your home purchase.

Frequently Asked Questions

1. Who requires mortgage insurance?
Buyers with less than 20% down payment on a home purchase require mortgage insurance.
2. Is mortgage insurance refundable?
No, mortgage insurance premiums are non-refundable but may be canceled once LTV drops below 80%.
3. Can I pay mortgage insurance upfront?
Yes, you can pay premiums upfront or add them to your mortgage principal.
4. Does mortgage insurance protect me?
No, it protects the lender, not the borrower or your family.
5. How does mortgage insurance affect my mortgage?
It increases your mortgage principal and monthly payments, potentially adding thousands over time.
6. Can I shop for mortgage insurance?
Yes, besides CMHC, private insurers like Genworth and Canada Guaranty offer mortgage insurance with similar rates.
7. What happens if I don’t get mortgage insurance with less than 20% down?
Your mortgage lender will likely not approve your loan, or it will come with higher interest rates and fees.
8. How do I cancel mortgage insurance?
Request cancellation from your lender once your mortgage balance drops below 80% of your home’s current value.

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