Mortgage Default Insurance

When mortgage default insurance is required

The rule is simple: if your down payment is less than 20% of the purchase price, your mortgage must be insured against default. These are called high-ratio or insured mortgages. Insured mortgages are only available on homes with a purchase price under $1.5 million (as of July 2026); above that cap, you need at least 20% down, full stop.

The minimum down payment itself is tiered (as of July 2026): 5% of the first $500,000 of the purchase price, plus 10% of any portion above that. On a $650,000 home, that works out to $25,000 plus $15,000, so $40,000, about 6.2% of the price.

Once your down payment reaches 20%, the insurance is no longer required. Some lenders still insure low-risk conventional mortgages behind the scenes at their own expense, but that does not involve a premium charged to you.

It protects the lender, not you

This is the part that surprises almost everyone: you pay the premium, but the lender is the insured party. If you default and the sale of the home does not cover the mortgage balance, the insurer pays the lender for the shortfall. You get no payout, and the insurer can even pursue you to recover what it paid the lender.

So why does this product exist, and why should you not resent it? Because without it, lenders would treat small down payments as high-risk loans and either refuse them or price them punishingly. Default insurance transfers that risk to an insurer, which is what lets a buyer with 5% down borrow at rates close to, and often below, what a buyer with 20% down pays. It is the price of admission to homeownership years before you could save 20%.

Not the same thing as mortgage life insurance

The names are dangerously similar, so let's draw a hard line. Mortgage default insurance is mandatory with less than 20% down, protects the lender, and pays out only if you default on your payments. Mortgage life insurance is optional, is sold to you at the bank or by insurers, and pays off your mortgage balance if you die (some versions also cover disability or critical illness). One protects the lender from you; the other protects your family from your mortgage.

If a banker offers you "mortgage insurance" at signing, they are almost certainly talking about the optional life insurance product, not the default insurance you are required to carry. Evaluate it separately, on its own merits, like any life insurance purchase.

The three providers

Canada has three mortgage default insurers. Your lender, not you, chooses which one insures your loan, and the premium rates are the same across all three.

• CMHC (Canada Mortgage and Housing Corporation), a federal Crown corporation and the best-known name in Canadian housing.
• Sagen, the largest private-sector insurer, formerly known as Genworth Canada.
• Canada Guaranty, a fully Canadian-owned private insurer.

How much it costs

The premium is a percentage of the loan amount, and the percentage depends on your down payment. The smaller the down payment, the higher the rate (as of July 2026):

How the premium is paid

You can pay the premium in cash at closing, but almost nobody does. Standard practice is to add it to the mortgage balance, where it gets amortized along with everything else. That keeps closing costs down, but it means you pay interest on the premium for the life of the loan.

One cost cannot be rolled in: provincial sales tax. Ontario, Quebec, Saskatchewan and Manitoba charge sales tax on the insurance premium, and that tax must be paid in cash at closing (as of July 2026). Budget for it, because it arrives at the exact moment your cash is most depleted.

Insured mortgages also come with a shorter runway: the amortization period is normally capped at 25 years. Since December 2024, first-time buyers and buyers of new construction can get insured 30-year amortizations (as of July 2026).

The upside: near-prime rates on a small down payment

Here is the counterintuitive part. Because the insurer absorbs the default risk, an insured mortgage is actually the safest loan a lender can make, and lenders compete hard for them. Insured mortgage rates are often slightly lower than uninsured rates for the same mortgage term. The premium is real money, but part of it comes back to you through a better rate at every renewal while the insurance remains attached to the loan.