What Is Mortgage Default Insurance?
When you’re buying a home with less than 20% down, mortgage default insurance is required.
There are three mortgage insurers in Canada: CMHC, Sagen, and Canada Guaranty.
This insurance protects the lender in case you stop making your payments, and it’s what allows you to get a mortgage with as little as 5% down.
Why It Exists
Lenders take on more risk when you’re borrowing more than 80% of the home’s value. Without mortgage default insurance, you would need at least 20% down to qualify.
This insurance reduces risk for the lender, which is why it’s mandatory on high-ratio mortgages.
How It Helps You
Mortgage default insurance is often viewed as an added cost, but it comes with real benefits. It allows you to:
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Buy a home with as little as 5% down
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Qualify sooner instead of waiting years to save 20%
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Access the lowest available interest rates
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Start building equity rather than paying rent
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Keep more savings available if needed for other goals
Even though rates are slightly higher when you put 20% down or more, you’ll often save money in the long run by avoiding the added cost of mortgage default insurance.
With that said, depending on your situation, paying the insurance and putting less down can still be a great option — especially if you haven’t had the chance to save 20%, if you want to use some of your savings to pay off higher-interest debt, or if you'd rather keep extra funds aside as a rainy day buffer.
How Much Does It Cost?
The premium is based on how much you’re putting down. It’s a one-time fee that’s added to your mortgage and paid off over time.
Here’s a quick breakdown of standard CMHC/Sagen/Canada Guaranty premium rates for a 25-year amortization:
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5% to 9.99% down → 4.00% of mortgage
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10% to 14.99% down → 3.10%
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15% to 19.99% down → 2.80%
Other factors can affect the premium as well:
Example:
If you borrowed your 5% down payment and chose a 30-year amortization, your insurance premium would be 4.70% of the mortgage amount.
The Bottom Line
Mortgage default insurance allows more Canadians to buy a home with less than 20% down — and start building equity sooner. In many cases, it’s what makes homeownership possible.
[Click here to get pre-approved and see how it applies to your situation.]
Frequently Asked Questions (FAQ)
Do I have to pay the mortgage insurance premium upfront?
No. It’s typically added to your mortgage balance and paid off over time.
How much is the insurance premium?
It depends on your down payment, amortization, and whether your down payment is borrowed. Rates range from 2.8% to 4% in most cases.
Is it only required on first-time purchases?
No. It applies any time your down payment is under 20%, even if it’s not your first home.