Mortgage Default Insurance, also called CMHC Insurance, is mandatory in Canada for purchases with down payments between the minimum down payment in Canada (5%) and 19.99%. Down payments of 20% or more do not require insurance. It exists to protect lenders should you stop making mortgage payments and default on your loan.
The amount of mortgage default insurance is directly related to your down payment. Your insurance amount depends on the size of your down payment as a percentage of your total home purchase price.
|Down Payment||5% - 9.99%||10% - 14.99%||15% - 19.99%||20%+|
The only way to lower the amount of insurance you’ll pay is to increase your down payment or, alternatively, to take on a lower mortgage, (to ensure your down payment has a bigger impact).
Your insurance is rolled into your mortgage amount, not paid off as a monthly bill or a lump sum like closing costs and legal fees. For example, if you have a mortgage for your home of $285,000 and your insurance is $11,400, you’d need to borrow $296,400 from your lender.
Although CMHC insurance is rolled into your mortgage and paid off over the duration of your loan, there is one cost you have to pay for up-front in cash.
If you live in Manitoba, Ontario, or Quebec, you need to pay the provincial sales tax on your CMHC insurance, due on closing day.
You are buying a $400,000 home in Ontario and you have $30,000 to put down.
$30,000 = 15% down payment
CMHC insurance: 2.8% of mortgage amount with 15% down payment
Total mortgage amount: $400,000 - $30,000 = $370,000
CMHC insurance = $370,000 x 2.8% = $10,360
Ontario PST on CMHC amount = $10,360 x 8% = $828.80
There are three providers of mortgage default insurance in Canada: The Canada Mortgage and Housing Corporation, Genworth Financial, and Canada Guaranty. The insurance rates are the same for all three providers.