What Is It?
In Canada, any mortgage with a down payment of less than 20% of the purchase price is classified as a high-ratio mortgage and is legally required to have mortgage default insurance. The three approved insurers are CMHC (Canada Mortgage and Housing Corporation), Sagen (formerly Genworth Canada), and Canada Guaranty.
Unlike US-style Private Mortgage Insurance (PMI), which is typically paid monthly and can be cancelled when equity reaches 20%, Canadian mortgage default insurance works differently — and most homeowners don’t fully understand how.
How Canadian Mortgage Default Insurance Works
Premium structure: The insurance premium is a one-time upfront cost calculated as a percentage of the mortgage amount:
| Down Payment | Premium (% of Mortgage Amount) |
|---|---|
| 5.00–9.99% | 4.00% |
| 10–14.99% | 3.10% |
| 15–19.99% | 2.80% |
Most borrowers add this premium to their mortgage balance (it’s added at funding, not paid as cash).
Key difference from US PMI:
- The premium is paid once (at the time of the mortgage)
- There is NO ongoing monthly premium charge to cancel
- Once the premium is added to the mortgage and the mortgage is funded, the insurance obligation is complete — no further action is needed
When Are You “Done Paying”?
Because the premium is added to the mortgage balance upfront, you are effectively paying it off gradually as you pay down your mortgage principal. Unlike US PMI, there is no ongoing monthly insurance payment and no cancellation process — the insurance was purchased at origination.
However, if you refinance or renew your mortgage with a new lender, and you still have less than 20% equity at that time, you may need to obtain new mortgage default insurance. If you have accumulated 20%+ equity, you refinance as a conventional mortgage without a new insurance premium.
What Happens When You Refinance or Switch Lenders
Refinancing with the same insurer’s coverage: If you renew with your existing lender and haven’t refinanced for a higher amount, your existing insurance coverage typically carries forward — no new premium.
Refinancing with a different lender: The new lender may require new mortgage default insurance if your equity is below 20%, resulting in another premium charge. When switching lenders at renewal, ensure you have 20%+ equity to avoid a new premium.
Refinancing to a higher amount: Adding to your mortgage (e.g., taking out a HELOC or increasing the mortgage at renewal) while below 20% equity may trigger a new or top-up insurance premium.
What Most People Don’t Know
- The premium increases your amortization. Adding the premium to the mortgage means you’re paying interest on it for the full amortization period. A $15,000 CMHC premium financed at 5% over 25 years costs significantly more than $15,000 in total.
- You can pay the premium in cash instead of adding it to the mortgage. Most buyers add it to the mortgage, but paying it upfront at closing reduces your total interest cost over the amortization.
- CMHC-insured mortgages have maximum purchase prices. CMHC insurance is only available for properties with a purchase price below $1,500,000 (as of 2024). For higher-value properties, 20% down is required regardless.
- The insurance protects the lender, not you. If you default on your mortgage, CMHC pays the lender — but CMHC then pursues you for the loss. The insurance doesn’t protect you from liability; it allows lenders to offer lower-down-payment mortgages at lower interest rates than they would otherwise charge.
Frequently Asked Questions
I’ve been paying my mortgage for 5 years and now have 22% equity. Do I need to “cancel” the insurance?
No action is required — the insurance was a one-time charge already added to your original mortgage. There is no ongoing monthly insurance payment to cancel. Your current payments are just paying down the mortgage principal and interest.
I want to refinance to access equity. My current equity is 18%. Will I need new CMHC insurance?
A conventional refinance to access equity (cash-out refinance) must have a maximum 80% loan-to-value ratio under OSFI mortgage rules — meaning at least 20% equity is required. You cannot cash-out-refinance with only 18% equity, so no new insurance premium is triggered (because the refinance simply can’t happen until you reach 20%).
Does CMHC insurance affect my mortgage rate?
Indirectly, yes — CMHC-insured mortgages typically have slightly lower interest rates than uninsured mortgages because lenders face less risk. For first-time buyers with small down payments, the lower rate partially offsets the insurance premium cost.
I paid off my mortgage entirely. Can I get a refund of the unused portion of the CMHC premium?
No — the CMHC premium is non-refundable, regardless of how quickly you pay off the mortgage.