What is CMHC mortgage insurance, and when do you pay it?

Under 20% down means mortgage loan insurance. The premium is 0.6% to 4.5% of the loan, and Ontario adds 8% tax on it that you cannot put in the mortgage.

Most buyers meet this line for the first time on a lawyer's statement, about a week before closing, and it is rarely the premium itself that catches them. It is the tax on the premium, which has to be paid in cash and cannot be rolled into the loan.

What is mortgage loan insurance, and who does it protect?

It protects your lender. The Financial Consumer Agency of Canada puts it in two sentences: "Mortgage loan insurance protects the mortgage lender in case you can't make your mortgage payments. It doesn't protect you." It is also called mortgage default insurance.

What you get in exchange is access. A lender will not write a mortgage above 80 per cent of what a home is worth without it, so the insurance is the thing that makes a small down payment possible at all.

Three companies sell it in Canada: Canada Mortgage and Housing Corporation, Sagen and Canada Guaranty Mortgage Insurance Company. CMHC is the federal one, which is why the whole product tends to get called CMHC insurance whoever actually underwrote it. Your lender arranges it on your behalf. You do not shop for it and you do not choose the insurer.

When do you have to buy it?

When your down payment is under 20 per cent of the price. FCAC: "If your down payment is less than 20% of the price of your home, you'll typically need to buy mortgage loan insurance."

The minimum down payment itself is federal and does not vary by lender. FCAC sets it out as three bands:

• 5 per cent of the purchase price at $500,000 or less
• 5 per cent of the first $500,000 plus 10 per cent of the portion above it, between $500,000 and $1.5 million
• 20 per cent at $1.5 million or more

Two things worth knowing beyond the threshold. FCAC says a lender "may require that you get mortgage loan insurance, even if you have a 20% down payment", and names being self-employed or having a poor credit history as the usual reasons. And normally the minimum down payment has to come from your own funds.

What does the premium actually cost?

Between 0.6 and 4.5 per cent of the mortgage amount, and where you land is set by the size of the loan against the value of the home, not by your income or your rate. CMHC publishes the schedule for owner-occupied homeowner loans:

• Up to and including 65 per cent loan to value: 0.60 per cent
• 65.01 to 75 per cent: 1.70 per cent
• 75.01 to 80 per cent: 2.40 per cent
• 80.01 to 85 per cent: 2.80 per cent
• 85.01 to 90 per cent: 3.10 per cent
• 90.01 to 95 per cent: 4.00 per cent
• 90.01 to 95 per cent with a non-traditional down payment: 4.50 per cent

Those are CMHC's own figures, charged on the total loan amount.

Run a $900,000 home through it. The minimum down payment is $25,000 on the first $500,000 plus $40,000 on the remaining $400,000, so $65,000. That leaves a mortgage of $835,000, which is 92.8 per cent of the price and lands in the 4.00 per cent band. The premium is $33,400.

CMHC calls the premium "a one-time charge which may be added to the insured loan amount", and most buyers add it, which takes that mortgage to $868,400. FCAC's note on doing that is short and worth reading twice: "If you add your premium to your mortgage, you pay interest on your premium. The interest rate is the same rate as you're paying for your mortgage." You are borrowing the premium over the full amortization.

Why do you need cash for the tax on the premium?

Because Ontario taxes the premium, and that part cannot go into the mortgage.

The Ontario Ministry of Finance charges "Retail Sales Tax (RST) at the rate of eight per cent" on premiums paid under taxable insurance contracts. FCAC states the consequence for a buyer plainly: "Ontario, Manitoba and Quebec apply provincial sales tax to mortgage loan insurance premiums. Your lender can't add the provincial tax on premiums to your mortgage. You must pay this tax when you get your mortgage."

On the $900,000 example that is 8 per cent of $33,400, which is $2,672, due on closing day in cash. It sits alongside land transfer tax and legal fees rather than instead of them, and it is the single most commonly missed line in a closing cost budget in this province.

Can you avoid it by putting 20 per cent down?

Yes, and that is the only dependable way to avoid it. The arithmetic of the choice is worth seeing rather than assuming, though.

On that same $900,000 home, 20 per cent is $180,000 against a minimum of $65,000. Going the insured route costs $33,400 in premium plus $2,672 in tax. Going the uninsured route costs $115,000 more in cash on the day. Which of those a household can actually do is a different question from which is cheaper over five years, and the honest answer for most first-time buyers in the GTA is that the choice is made for them by what is in the account. Our affordability calculator will run both.

One thing the premium does not do is buy you a better rate on paper. It buys you the loan.

What happens above $1.5 million?

Nothing is available. Mortgage loan insurance stops at that price, so a home at $1.5 million or more needs 20 per cent down and there is no insured option at any premium.

The cap moved on 15 December 2024, when the Department of Finance "increased the $1 million price cap for insured mortgages to $1.5 million". CMHC's own eligibility now reads that the "maximum purchase price / lending value or as-improved property value must be below $1,500,000 for homeowner loans".

That line matters more in Toronto than almost anywhere else in the country, because a good number of freehold houses sit just under it. It is the same cliff we wrote about in what a pre-approval is really telling you.

How long can you amortize an insured mortgage?

Twenty-five years as the default. CMHC states that the "maximum amortization period is 25 years" and points buyers who qualify for thirty to a separate product of its own.

The federal rule behind that came into force on the same December 2024 date, making 30-year amortizations available to all first-time home buyers and to all buyers of new builds. If you are in either group, ask your lender to quote the payment both ways, because the longer amortization lowers the monthly figure and raises the total interest.

If you are buying your first home, the rebates and programs available in Ontario are worth reading in the same sitting.

Is this the same as title insurance, or the insurance the bank offers you?

No, and all three get called mortgage insurance at some point in a transaction.

Mortgage loan insurance is the one on this page: mandatory under 20 per cent down, paid once, protects the lender against your default.

Title insurance is a separate policy about ownership and registration problems, bought through your lawyer, and it does protect you.

The life and critical illness coverage offered when you sign is a third thing again. FCAC describes mortgage life insurance as "an optional product that may pay the balance on your mortgage to the lender upon your death", and says directly that "these optional products are different from mortgage loan insurance that you are required to purchase if your down payment on your home is less than 20%". Optional means you can say no.

If you are working out what you can actually put together for a purchase this year, that is the conversation we start with on the buy side.