CostCMHC insurance protects the lender, not you, if you default on a mortgage with less than 20% down. The premium is a percentage of your loan based on your down payment size, added to your mortgage principal rather than paid upfront in most provinces.
What CMHC insurance actually protects
Mortgage default insurance — most commonly from CMHC (Canada Mortgage and Housing Corporation), though Sagen and Canada Guaranty are the two private alternatives — protects the lender if you stop making payments and the home sale doesn't cover the outstanding balance. It does not protect you, the borrower, in any way; it exists purely to let lenders offer mortgages with less than 20% down without taking on that risk themselves. Without this system, most lenders would simply require 20% down from everyone.
What it actually costs
The premium is calculated as a percentage of your total loan amount, and that percentage rises as your down payment shrinks — a 5% down payment carries a meaningfully higher premium rate than a 15% one. Rather than being paid in cash at closing, the premium is added directly onto your mortgage principal and repaid over your full amortization, which means you also pay interest on the premium itself for the life of the loan.
$500,000 home, 5% vs. 15% down
| 5% down — approximate premium rate | ~4.0% of loan |
| 15% down — approximate premium rate | ~2.8% of loan |
Run your own numbers through the mortgage payment calculator, which calculates your exact premium and shows the full comparison across 5%, 10%, 15%, and 20% down side by side.
The PST catch that surprises buyers
In Ontario, Quebec, Saskatchewan, and Manitoba, provincial sales tax on the insurance premium is due in cash at closing — it cannot be added to the mortgage like the premium itself. This is a genuinely easy detail to miss, since every other cost tied to the mortgage gets financed, and it can catch buyers off guard when their lawyer's final statement of adjustments arrives a few days before closing with an unexpected line item.
Why investment properties can't use it
CMHC-style insurance exists specifically to help owner-occupiers into the market with less capital — it was never designed to subsidize investment purchases. As a result, investment (non-owner-occupied) properties always require at least 20% down, regardless of purchase price, and can never be insured this way. Budget for that higher down payment from the start if you're buying to rent out, rather than discovering the requirement partway through a pre-approval conversation.
See your exact premium and total financed amount on the mortgage payment calculator, or check your affordability first if you haven't settled on a price range yet.