If you are buying a home in Canada with less than a 20% down payment, CMHC mortgage default insurance is mandatory. It protects the lender — not you — but you pay for it. Understanding exactly how it works, what it costs, and how to legitimately reduce or avoid it can save you tens of thousands of dollars.
What Is CMHC Insurance?
CMHC (Canada Mortgage and Housing Corporation) mortgage default insurance protects lenders if a borrower defaults. It is required by law for all federally regulated lenders when the down payment is less than 20% of the purchase price.
The insurance premium is added to your mortgage balance — you do not pay it upfront. However, you do pay provincial sales tax on the premium at closing in Ontario, Manitoba, Quebec, and Saskatchewan, which must be paid in cash.
CMHC insurance protects your lender, not you. If you default, CMHC pays the lender — then pursues you for recovery. This is fundamentally different from homeowner's insurance.
CMHC Premium Rates by Down Payment (2026)
| Down Payment | Loan-to-Value | CMHC Premium Rate |
|---|---|---|
| 5% – 9.99% | 90.01% – 95% | 4.00% |
| 10% – 14.99% | 85.01% – 90% | 3.10% |
| 15% – 19.99% | 80.01% – 85% | 2.80% |
| 20%+ | 80% or less | 0% — No insurance required |
Real Dollar Cost: $650,000 Home
| Down Payment | CMHC Premium | Added to Mortgage | PST (Ontario 8%) |
|---|---|---|---|
| $32,500 (5%) | 4.00% | $24,700 | $1,976 |
| $65,000 (10%) | 3.10% | $18,135 | $1,451 |
| $97,500 (15%) | 2.80% | $15,470 | $1,238 |
| $130,000 (20%) | — | $0 | $0 |
Eligibility Requirements
- Purchase price: $1,500,000 or less (expanded from $1M in December 2024)
- Down payment source: Your own savings, family gift, or proceeds from another property sale — cannot be borrowed
- Amortization: Maximum 25 years for insured mortgages
- Credit score: Minimum 600 for 5% down
- Property type: Must be in Canada, owner-occupied, 1–4 unit property
In December 2024, the federal government raised the insured mortgage limit to $1,500,000. For the first time, buyers with 10–19.9% down on homes over $1M can access insured mortgage rates in expensive markets like Toronto and Vancouver.
Provincial PST on CMHC Premiums
This catches many first-time buyers off guard. PST on the CMHC premium must be paid in cash at closing — it cannot be added to the mortgage.
| Province | PST Rate | PST on $18,135 Premium |
|---|---|---|
| Ontario | 8% | $1,451 |
| Manitoba | 7% | $1,269 |
| Quebec | 9% | $1,632 |
| Saskatchewan | 6% | $1,088 |
| All other provinces | 0% | $0 |
How to Avoid or Reduce CMHC Insurance
1. Save a 20% Down Payment
The most straightforward route. On a $650,000 home, a 20% down payment of $130,000 eliminates CMHC costs entirely and often qualifies you for slightly better rates on conventional mortgages.
2. Use the FHSA and RRSP Home Buyers' Plan Together
First-time buyers can combine the First Home Savings Account (up to $40,000 tax-free) and the RRSP Home Buyers' Plan (up to $35,000 per person, $70,000 per couple) to accelerate their down payment to 20% faster.
3. Gift From a Family Member
Gifts from direct family members count as valid down payment funds for CMHC purposes. The lender will require a gift letter confirming it is not a loan.
Calculate Your CMHC Premium
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