CMHC insurance is one of the most misunderstood costs in the Canadian homebuying process. Most people know it exists. Fewer understand that it protects the lender, not you — and that despite this, you are the one who pays for it. Here's the complete picture.

What is CMHC mortgage default insurance?

Canada Mortgage and Housing Corporation (CMHC) is a Crown corporation that provides mortgage default insurance to Canadian lenders. When you purchase a home with a down payment of less than 20%, your lender is required to obtain this insurance. Two private alternatives — Sagen (formerly Genworth Canada) and Canada Guaranty — offer equivalent products.

The insurance protects the lender against default — if you stop making payments and the lender cannot recover the full mortgage amount through power of sale or foreclosure, CMHC compensates the lender for the shortfall. You, the borrower, are not protected by this insurance — but you pay the premium.

The reason this arrangement exists is that it enables Canadians to buy homes with as little as 5% down. Without CMHC insurance, lenders would not take on the risk of high-ratio lending at scale. The insurance essentially underwrites Canada's low-down-payment mortgage market.

Current CMHC premium rates (2024–25)

Down paymentPremium (% of insured amount)Example: $600,000 home, 5% down
5.00%–9.99%4.00%$570,000 insured → $22,800 premium
10.00%–14.99%3.10%$540,000 insured → $16,740 premium
15.00%–19.99%2.80%$510,000 insured → $14,280 premium
20%+No insurance required—

How the premium is paid — and its effect on your mortgage

The CMHC premium is almost always added to your mortgage balance rather than paid as an upfront closing cost. On a $600,000 home with a 5% down payment ($30,000), your insured mortgage is $570,000. The 4.00% premium of $22,800 is added to the balance, giving you a total mortgage of $592,800.

This means you pay interest on the premium over the entire life of your mortgage. On a 25-year amortisation at 5%, that $22,800 premium actually costs approximately $34,000 in total over the amortisation period once interest is included. This is the true cost of a low-down-payment purchase — and it's worth understanding before deciding whether to enter the market sooner at 5% down or wait to accumulate 20%.

The 20% down payment calculation
Whether to save to 20% specifically to avoid CMHC insurance is a legitimate financial question — and the answer depends on your market, your savings rate, and price trajectory. If you are three years away from 20% down in a market where prices are rising, the CMHC premium you'd pay by buying now may be less than the additional purchase price you'd face in three years. If your market is flat or declining, waiting may make sense. The Turning Keys Rent vs. Buy calculator and down payment tools model both scenarios.

CMHC insurance and the maximum purchase price

CMHC mortgage default insurance is available only on homes priced below $1,500,000 (the threshold as of December 15, 2024 — increased from $1,000,000). Homes at or above $1,500,000 require a minimum 20% down payment, and CMHC insurance is not available regardless of how much you put down.

For homes between $500,000 and $1,499,999, the down payment rules apply proportionally: 5% on the first $500,000 and 10% on the portion above $500,000. CMHC insurance can still apply to these purchases if the resulting down payment is less than 20% of the total price.

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Frequently asked questions

What is CMHC insurance and who does it protect?
CMHC mortgage default insurance protects the lender — not the borrower — if you stop making mortgage payments and the lender cannot recover the full loan through foreclosure. Despite this, you pay the premium. The rationale is that CMHC insurance is what makes low-down-payment mortgages possible: without it, lenders would not offer mortgages with less than 20% down because the risk would be too high.
What are the current CMHC insurance rates?
As of 2024, CMHC premiums are: 4.00% for a down payment of 5%–9.99%; 3.10% for a down payment of 10%–14.99%; and 2.80% for a down payment of 15%–19.99%. The premium is calculated on the insured mortgage amount (purchase price minus down payment) and is almost always added to the mortgage balance rather than paid upfront.
Is CMHC insurance required if I have 20% down?
No. CMHC mortgage default insurance is not required — and is not available — on conventional mortgages where the down payment is 20% or more. Some buyers choose to get portfolio insurance from their lender for other reasons, but standard CMHC insurance does not apply to purchases with 20%+ down.
Can I avoid CMHC insurance?
The only way to avoid CMHC insurance (and the other mortgage default insurers Sagen and Canada Guaranty, which work similarly) is to have a down payment of at least 20% of the purchase price. There is no other way to avoid the premium for an insured mortgage. Some buyers strategically save to reach 20% specifically to avoid this cost — whether this makes sense financially depends on how long it would take to save the additional amount versus entering the market sooner.
Is CMHC insurance tax deductible?
CMHC mortgage default insurance premiums are generally not tax deductible for owner-occupied principal residences. They may be deductible for income-producing rental properties in some circumstances — consult a tax professional for your specific situation.

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Disclaimer: This article is educational content only — not financial, mortgage, legal, or real estate advice. Rules and figures are current as of 2024–25 and may change. Always consult a licensed professional for advice specific to your situation. Turning Keys is operated by Wise Victoria Mortgages (BCFSA Lic. #MB600614) and Nick Wise Personal Real Estate Corporation.