Quick Answer
In Canada, **CMHC insurance** is a mandatory default insurance required on home purchases where the down payment is less than 20% of the purchase price (known as a high-ratio mortgage). The premium ranges from **2.80% to 4.00%** of your total loan amount, depending on the size of your down payment, and is added directly to your mortgage balance. You cannot get CMHC insurance on homes priced at **CA$1,000,000 or more**, which require a minimum 20% down payment.
CMHC (Canada Mortgage and Housing Corporation) insurance is a mortgage default insurance policy that protects lenders against financial loss if a borrower defaults on their mortgage payments. While the borrower pays the premium, the insurance protects the lender, enabling them to offer competitive interest rates to buyers with lower down payments.
Why Does CMHC Insurance Exist?
Without default insurance, Canadian banks would rarely lend money to home buyers who have less than a 20% down payment, as the risk of default would be too high. CMHC insurance acts as a safety net. Because the federal government backs the insurance, lenders are comfortable offering mortgages with down payments as low as 5%. This allows thousands of Canadians to enter the housing market years earlier than they would if they had to save a full 20% down payment.
Canada's Down Payment Rules
If you are buying a home in Canada, your minimum down payment depends on the purchase price of the property:
- Under CA$500,000: The minimum down payment is 5% of the purchase price.
- CA$500,000 to CA$999,999: The minimum down payment is 5% on the first $500,000, plus 10% on the remaining portion.
- CA$1,000,000 or more: CMHC insurance is not available. The minimum down payment is a flat 20%.
Additionally, any mortgage that requires CMHC insurance is restricted to a maximum amortization period of 25 years. Uninsured mortgages (with 20% down or more) can have amortization periods of up to 30 years.
CMHC Premium Rates (Tiers)
The cost of CMHC insurance is called the premium. It is calculated as a percentage of your total loan amount. The premium rate decreases as your down payment increases. Below are the standard CMHC premium rates:
| Down Payment Range | Loan-to-Value (LTV) Ratio | CMHC Premium Rate |
|---|---|---|
| 5.00% to 9.99% | 90.1% to 95.0% | 4.00% |
| 10.00% to 14.99% | 85.1% to 90.0% | 3.10% |
| 15.00% to 19.99% | 80.1% to 85.0% | 2.80% |
| 20.00% or more | 80.0% or less | No Insurance Required (0%) |
Real-World Example Calculation
Let's say you purchase a home in Calgary for CA$600,000 and decide to put down the minimum required amount.
- Calculate Minimum Down Payment:
5% of the first $500,000 = $25,000
10% of the remaining $100,000 = $10,000
Total Minimum Down Payment = $35,000 (which represents 5.83% of the purchase price). - Calculate Base Loan Amount:
$600,000 (Purchase Price) - $35,000 (Down Payment) = $565,000. - Determine CMHC Premium Rate:
Since your down payment of 5.83% is between 5% and 9.99%, your premium rate is 4.00%. - Calculate CMHC Premium:
$565,000 (Base Loan) × 4.00% = $22,600. - Calculate Total Mortgage Amount:
$565,000 (Base Loan) + $22,600 (CMHC Premium) = $587,600.
The $22,600 premium is added directly to your mortgage, meaning you will pay interest on this amount over the next 25 years.
How to Minimize or Avoid CMHC Insurance
There are two primary ways to reduce the impact of CMHC insurance on your finances:
- Put Down 20% or More: If you can secure a 20% down payment (e.g., $120,000 on a $600,000 home), your mortgage is classified as a conventional mortgage, and you do not have to pay any default insurance. This saves you both the premium and the interest on that premium.
- Aim for the Next Down Payment Tier: If you cannot reach 20%, try to hit 10% or 15%. As shown in the table, moving from a 9.9% down payment to a 10% down payment drops your premium rate from 4.00% to 3.10%, saving you thousands of dollars instantly.
Try Our Canada Mortgage Calculator
Estimating these calculations manually can be complex, especially when you factor in provincial taxes on the premium (for example, Ontario, Quebec, and Saskatchewan charge provincial sales tax on CMHC premiums, which must be paid in cash at closing).
Use our dedicated Canada Mortgage Calculator to instantly calculate your minimum down payment, CMHC premium, stress test eligibility, and see a complete amortization schedule.