The amount paid upfront. In Canada, the minimum down payment is 5%. Mortgage default insurance (commonly referred to as CMHC insurance) is required for down payments under 20%.
Notice: To be eligible for CMHC insurance, your amortization period must be 25 years or less.| Down Payment (% of Purchase Price) | 5–9.99% | 10–14.99% | 15–19.99% |
|---|---|---|---|
| CMHC Insurance (% of Mortgage Amount) | 4.00% | 3.10% | 2.80% |
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Mortgage default insurance, also known as Canada Mortgage and Housing Corporation (CMHC) Insurance, protects your mortgage lender in the case of a default. It is different from regular home insurance in Canada because default insurance protects your lender, while home insurance protects you.
CMHC insurance allows you to make a smaller down payment on your home. With CMHC insurance, you can make a down payment as low as 5%. Without CMHC insurance, you are required to make a down payment of at least 20%. CMHC-insured mortgages, or high-ratio mortgages, generally have lower mortgage rates when compared to uninsured mortgages. This means your mortgage interest savings can offset CMHC insurance fees.
The Canada Mortgage and Housing Corporation is owned by the Government of Canada, with the goal of making housing in Canada more affordable and accessible. To do so, the CMHC has a variety of federal government programs in place, such as providing financing and loans to build affordable apartments and rental units, to providing mortgage loan insurance for those looking to buy a home.
The CMHC also makes it easier for mortgage lenders to access money to lend out to Canadians through Canada Mortgage Bonds, which are CMHC-guaranteed bonds that are used to purchase National Housing Act (NHA) mortgage-backed securities (MBS) from lenders. In Canada, CMHC has the same role as FHA in the US.
Best 5 -Year Fixed Mortgage Rates in Canada Select Mortgage Term: See More RatesYour CMHC insurance rate is calculated as a percentage of your purchase price. This percentage depends on your down payment amount, with the premium being smaller for larger down payments. The CMHC premium is a one-time charge on the amount of your insured mortgage.
For properties located in Ontario, Quebec, Manitoba or Saskatchewan, provincial sales tax is applied to your CMHC premium amount.
| Down Payment (% of Purchase Price) | 5–9.99% | 10–14.99% | 15–19.99% |
|---|---|---|---|
| CMHC Insurance (% of Mortgage Amount) | 4.00% | 3.10% | 2.80% |
You may have to request for a CMHC-insured mortgage when applying for a mortgage from a lender. Your mortgage lender will obtain CMHC insurance and will pay for it on the closing date, with the lender passing the cost of the insurance premiums onto you.
You can choose to either pay the entire amount of your CMHC premium up-front, or pay it off gradually through your mortgage payments by adding the premium to your mortgage principal balance. Adding the cost of CMHC insurance to your mortgage balance will mean that your monthly mortgage payments will be higher. You can easily find out how much your monthly payments will be, including the cost of CMHC insurance, by using a monthly mortgage payment calculator.
If your property being insured is located in a province that charges provincial sales tax on the premium amount, you will have to pay this sales tax upfront. Sales tax cannot be added to your mortgage principal.
For example, making a 5% down payment on a $500,000 home in Ontario will result in a CMHC insurance premium of $19,000. Ontario HST on the premium will be $1,520, which will need to be paid immediately. The $19,000 premium can be added to your mortgage or paid in cash immediately as well.
CMHC insurance is required if your down payment is less than 20%. You won’t be able to get an uninsured mortgage from any major bank in Canada if your down payment is less than 20%. The Bank Act,Trust and Loan Companies Act, Insurance Companies Act, and Cooperative Credit Associations Act all limit Canadian financial institutions to lend no more than 80% of the value of the collateral when a loan is secured by real property. An exception is made to this rule if the portion of the loan over 80% of the collateral is insured against the risk of default by the borrower. Thus any mortgage with a loan-to-value (LTV) ratio of greater than 80% requires mortgage default insurance by law.
If you make a down payment of at least 20% or more, you do not need CMHC insurance. However, your mortgage lender can still require you to get CMHC insurance even if you make a higher down payment in certain cases, such as if you’re purchasing in a remote location where it might be difficult to find a buyer.
In these cases, you must make a down payment of 20% or higher to get a mortgage.
Not all mortgage lenders can offer CMHC-insured mortgages. Only National Housing Act (NHA) approved lenders are able to offer mortgages with CMHC mortgage insurance. NHA approved lenders include federally regulated financial institutions, such as banks and federal credit unions. For this reason, private mortgage lenders do not offer insured mortgages.
While most credit unions in Canada are provincially regulated, many credit unions are NHA approved by being a member of their provincial credit union association. For example, Credit Union Central of Ontario represents 90% of credit unions in Ontario. Credit Union Central of Ontario is an NHA-approved lender, which allows their member credit unions, such as DUCA Credit Union, FirstOntario Credit Union, and Meridian to offer insured mortgages.
Some lenders are also restricted to offering insured mortgages to certain provinces. For example, ATB Financial can only offer insured mortgages in Alberta, while Alterna Savings is limited to Ontario. All of Canada’s major banks, as well as many B-lenders can offer insured mortgages across Canada.
CMHC insurance covers your insured mortgage loan amount. If you were to default on your mortgage, the CMHC will provide compensation to your mortgage lender to cover their losses. Even though the CMHC will make up for any shortfalls to the lender after your home is sold, you are still responsible for paying your mortgage. CMHC insurance does not protect you from a foreclosure or prevent you from defaulting on your mortgage.
Mortgage life insurance, also called mortgage protection insurance, helps cover your mortgage if you cannot make mortgage payments due to job loss, disability, critical illness, or death. You can get mortgage life insurance to cover your mortgage balance even if your mortgage is CMHC-insured. You can get separate mortgage life insurance from a private insurer or from your lender if they offer it. However, mortgage life insurance does not provide coverage for your property. You will need to get home insurance, which will be separate from mortgage life insurance. You can get home insurance quotes in just a few minutes online.
Since mortgage life insurance covers your mortgage principal balance, the amount of your eligible coverage will slowly decrease over time as you make your monthly mortgage payments, while your insurance premiums will stay the same.
Mortgage life insurance rates are based on a monthly cost for every $1,000 of coverage. For example, if the cost was $0.20 per $1,000 of coverage, a $500,000 mortgage that is covered 100% will have a monthly premium of $100.00.
When you apply for a CMHC-insured mortgage, your mortgage lender will submit your application to the CMHC for review. If you pass their underwriting policies and get CMHC approval, the CMHC will issue a Certificate of Insurance (COI).
Your CMHC Certificate of Insurance is valid for the entire amortization period of your insured mortgage. This is because CMHC insurance covers your mortgage balance until your mortgage is fully paid off, not just for the initial mortgage term.
Your CMHC Certificate of Insurance and certificate number is used whenever you renew your mortgage or switch lenders.
If you choose to change lenders when it’s time to renew your insured mortgage, you do not have to pay for CMHC insurance again. CMHC insurance covers your mortgage until it is paid off, and will follow you from lender to lender. Simply provide your CMHC certificate of insurance or certificate number.