CMHC mortgage default insurance is one of the most misunderstood costs in Canadian real estate. It's mandatory if your down payment is less than 20% of the home's purchase price - but it's not home insurance. It protects the lender if you default on the mortgage. You pay for it, the lender benefits from it. Here's everything you need to know before you buy.
What Is CMHC Mortgage Insurance?
CMHC stands for Canada Mortgage and Housing Corporation, a federal Crown corporation. CMHC, along with private insurers Sagen (formerly Genworth) and Canada Guaranty, provides mortgage default insurance to lenders when borrowers have less than 20% equity. This insurance allows lenders to offer high-ratio mortgages (less than 20% down) at competitive interest rates; without it, most banks would not lend to buyers with small down payments.
CMHC Premium Rates for 2026
| Down Payment | Loan-to-Value | CMHC Premium Rate |
|---|---|---|
| 5% - 9.99% | 90.01% - 95% | 4.00% |
| 10% - 14.99% | 85.01% - 90% | 3.10% |
| 15% - 19.99% | 80.01% - 85% | 2.80% |
| 20%+ | 80% or less | No insurance required |
Real Example: $650,000 Home, 10% Down
Home price: $650,000. Down payment: $65,000 (10%). Mortgage required: $585,000. CMHC premium rate: 3.10%. CMHC premium: $585,000 × 3.10% = $18,135. Your actual mortgage (insured amount) becomes $585,000 + $18,135 = $603,135. That's the amount your monthly payment is calculated on.
⚠️ Important Consideration
In Ontario and Quebec, you also pay provincial sales tax (PST) on the CMHC premium at closing, which is NOT added to the mortgage. In Ontario, PST is 8% of the premium. On an $18,135 CMHC premium, you'd owe $1,451 in Ontario PST, payable at closing.
How to Avoid CMHC Insurance
- Save a 20% or larger down payment
- The insured mortgage limit is $1.5 million - homes over this price are not eligible for CMHC regardless of down payment
- Consider a smaller, less expensive home where you can reach 20% down
- Look into gifted down payment funds from family (allowed with a gift letter)
- First Home Savings Account (FHSA) contributions grow tax-free and withdrawals for a first home are tax-free
- RRSP Home Buyers' Plan (HBP) lets you withdraw up to $60,000 per person ($120,000 per couple) from your RRSP tax-free for a first home
The Hidden Cost Most Buyers Miss: Land Transfer Tax
CMHC insurance is one of several hidden costs in Canadian home buying. Land Transfer Tax varies dramatically by province: Ontario charges up to 2% on the purchase price. Toronto buyers pay the Ontario LTT plus a municipal LTT - effectively doubling the tax. BC charges up to 3% on homes over $2 million. First-time buyers in many provinces receive a rebate.
💡 Strategy Highlight
Use our Mortgage Calculator's Hidden Costs tab to get a complete, province-specific breakdown of every cost you'll face at closing - CMHC, land transfer tax, legal fees, title insurance, and more. Select your province for accurate estimates.
