Mortgage Default Insurance: How CMHC Premiums Work

If you are buying with less than 20% down, your lender will need mortgage default insurance, often called CMHC insurance. Here is what it covers, how the premium is worked out, who can stretch the amortization to 30 years, and what it adds to your mortgage, with examples.

The short version

What it is, and who it protects

Under the Bank Act, a bank can't lend more than 80% of a home's value unless the amount above that is insured. Mortgage default insurance covers the lender if the borrower stops paying, and in return, buyers can get a mortgage with a small down payment, often at a good rate. A lender can sometimes ask for insurance even with 20% down, for example for some self-employed borrowers.

It isn't mortgage life insurance. Mortgage life, disability and critical illness coverage are optional products that pay your lender if something happens to you. You don't have to buy them to be approved for a mortgage.

How much you need to put down

• Up to $500,000: 5% of the price
• $500,000 to under $1.5 million: 5% of the first $500,000, plus 10% of the rest
• $1.5 million or more: 20%, so no insured mortgage is available

On an $800,000 townhouse, the minimum is $25,000 plus $30,000, or $55,000. The $1.5 million cap applies to insurance applications from December 15, 2024. Before that, the limit had been $1 million since 2012, which mattered a great deal in Metro Vancouver.

How the premium is calculated

The premium is a percentage of the mortgage amount, and the rate depends on how much of the price you borrow, called the loan-to-value ratio:

• 80.01% to 85% (15% to just under 20% down): 2.80%
• 85.01% to 90% (10% to just under 15% down): 3.10%
• 90.01% to 95% (5% to just under 10% down): 4.00%
• 90.01% to 95% with a borrowed down payment: 4.50%, for borrowers with strong credit

Lower rates apply to insurance at 80% or less, which lenders usually buy themselves. Here is what the premium looks like on that $800,000 townhouse, with a 25-year amortization:

• $55,000 down (the minimum): a $745,000 mortgage and a $29,800 premium, so you borrow $774,800
• $80,000 down (10%): a $720,000 mortgage and a $22,320 premium
• $120,000 down (15%): a $680,000 mortgage and a $19,040 premium
• $160,000 down (20%): a $640,000 mortgage and no insurance required

Each step up in your down payment lowers both the amount you borrow and the premium rate.

30-year amortizations

With less than 20% down, the longest amortization is usually 25 years. Since December 15, 2024, you can qualify for up to 30 years if at least one borrower is a first-time buyer or you are buying a newly built home. A first-time buyer is, generally, someone who:

• Has never bought a home before, or
• Hasn't lived in a home owned by them or their current spouse or partner this year or in the previous four calendar years, or
• Has recently gone through the breakdown of a marriage or common-law relationship.

A new build must not have been lived in before, though a new condo with an interim occupancy period still counts. The insurers add 0.20 percentage points to the premium for amortizations over 25 years, so on the $745,000 example the premium becomes 4.20%, or $31,290. A longer amortization lowers your payments, but you pay more interest over the life of the mortgage.

How you pay it, and sales tax

You can add the premium to your mortgage, which means paying interest on it at your mortgage rate, or pay it up front. CMHC lists Ontario, Quebec and Saskatchewan as the provinces that charge sales tax on the premium, and that tax can't be added to the mortgage. BC isn't on the list, so buyers here don't pay sales tax on it.

Qualifying for an insured mortgage

• The stress test. You qualify at the greater of your contract rate plus 2% or 5.25%.
• Debt ratios. Housing costs can be up to 39% of gross income and all debts up to 44%. Half of any strata fee counts as a housing cost.
• Credit. At least one borrower needs a credit score of 600 or more.
• The home. It must be a home you will live in, with up to four units. One- and two-unit homes can be financed up to 95%, and three- and four-unit homes up to 90%.

I go through GDS, TDS and the stress test in How Much House Can You Afford?

Why insured rates are often lower

Because the lender's risk is covered, insured mortgages often come with lower rates than uninsured ones. CMHC says the insurance helps lenders offer rates comparable to those for borrowers with larger down payments, and Bank of Canada data show that new fixed-rate mortgages of five years or more at the chartered banks averaged about 4.0% when insured and about 4.2% when uninsured in April 2026. The premium is a real cost, but a lower rate offsets part of it.

When you move or renew

• Moving. If you sell and buy again, ask your lender about portability. You may be able to carry the insurance to your next home within a set time, six months at CMHC, and if you borrow more, pay a premium on the extra rather than a full new premium.
• Renewing. Insured mortgage holders can switch to another lender at renewal without passing the stress test again, as long as they don't add to the balance or stretch the amortization.
• Refinancing. A refinance generally can't be insured, so you can usually borrow only up to 80% of your home's value. One exception, since January 15, 2025, lets owners of homes worth up to $2 million refinance up to 90% of the home's value after the work, to build a secondary suite.

A refund for energy-efficient homes

CMHC, Sagen and Canada Guaranty each refund 25% of the premium when you buy a newly built, energy-efficient home. CMHC's program accepts certifications including the BC Energy Step Code at the higher steps (Step 3 or above for most houses and townhouses), ENERGY STAR for New Homes and R-2000, and you apply within two years of your mortgage closing. Ask your builder for the documents.

Questions buyers often ask me

When do I need mortgage default insurance?

When your down payment is less than 20% of the price. It is only available on homes priced under $1.5 million, so at $1.5 million or more you need 20% down.

How much does CMHC insurance cost?

For most buyers, 2.80% to 4.00% of the mortgage, depending on your down payment. With 5% down on a $500,000 condo, the premium is 4.00% of $475,000, or $19,000.

Do I pay PST on the premium in BC?

No. CMHC lists Ontario, Quebec and Saskatchewan as the provinces that charge sales tax on the premium.

Can I get a 30-year amortization with less than 20% down?

Yes, if at least one of you is a first-time buyer or you are buying a newly built home. The premium is 0.20 percentage points higher.

Is CMHC insurance the same as mortgage life insurance?

No. Default insurance protects your lender and is required with less than 20% down. Mortgage life insurance is optional.

Planning your purchase? See first-time buyer programs in BC, closing costs to budget for and gifted down payments, or try my mortgage calculator.

This article is general information, not financial advice. Premiums and rules were current at the time of writing, and examples use CMHC's standard premium rates. For CMHC's guide, see mortgage loan insurance cost.