Buying a home in Ontario comes with plenty of new terminology—and one of the most misunderstood is mortgage default insurance, often casually called CMHC insurance.
Many buyers assume this insurance protects them if they miss mortgage payments. In reality, it protects the lender—but understanding how it works can directly impact your mortgage approval, your interest rate, and how much home you can comfortably buy.
Here’s a straightforward breakdown of how mortgage default insurance works in Ontario.
What Is Mortgage Default Insurance?
In Canada, if you purchase a residential property with less than a 20% down payment, mortgage default insurance is generally required. This is called a high-ratio mortgage.
Because a smaller down payment creates more risk for the lender, the insurer guarantees the mortgage in the event of default. The practical benefit for buyers is that insured mortgages often qualify for lower interest rates than uninsured mortgages.
That can make a meaningful difference in affordability—especially when navigating the Greater Toronto Area housing market.
CMHC vs. Sagen vs. Canada Guaranty: What’s the Difference?
Many buyers use “CMHC insurance” as a catch-all term, but Canada actually has three mortgage default insurance providers. Your mortgage professional will help determine which provider fits your specific financial file best:
1. Canada Mortgage and Housing Corporation (CMHC)
Canada’s federal Crown corporation and the most recognized mortgage insurer in the country.
2. Sagen
Formerly Genworth Canada, Sagen is Canada’s largest private mortgage default insurer.
3. Canada Guaranty
A major, privately owned Canadian mortgage insurer that offers robust alternative programs for diverse buyer profiles.
While their core premium rates are identical, their underwriting flexibility can differ depending on income type, down payment structure, and unique property details.
Important Distinction: Mortgage default insurance is entirely different from mortgage life or disability insurance. It protects the lender—not the borrower.
Who Needs Mortgage Default Insurance in Ontario?
Mortgage default insurance typically applies when your down payment is between 5% and 19.99%. To qualify, insured mortgages must meet strict federal guidelines:
Maximum Purchase Price
Homes purchased for under $1.5 million may qualify for insured financing. Properties at $1.5 million or more automatically require a conventional mortgage with a minimum 20% down payment.
Down Payment Tiers
The minimum down payment in Canada is calculated progressively based on the purchase price:
5% on the first $500,000
10% on the portion between $500,000 and $1,499,999
Example Calculation: On a purchase price of $900,000:
First $500,000 = $25,000
Remaining $400,000 = $40,000
Minimum required down payment = $65,000
Amortization Rules
The standard maximum amortization for insured mortgages is 25 years. However, a 30-year amortization is available to help lower monthly payments under two specific exceptions:
You are an eligible first-time homebuyer.
You are purchasing an eligible newly built home.
Occupancy Rules
The home must be located in Canada and intended as an owner-occupied property (or occupied by an immediate family member on a rent-free basis).
How Much Does Mortgage Default Insurance Cost?
Insurance premiums are calculated as a percentage of your total loan amount and are based entirely on your Loan-to-Value (LTV) ratio
Note: If you qualify for and choose a 30-year amortization, a small premium surcharge of 0.20% is added to the standard rates above.
Example Scenario:
Purchase price: $700,000
Down payment: 10% ($70,000)
Mortgage amount before insurance: $630,000
Estimated premium at 3.10% = $19,530
This premium is added directly to your principal mortgage balance, meaning you pay it down gradually over time rather than upfront.
Ontario Closing Cost Detail: PST on the Insurance Premium
A detail many Ontario buyers miss during their budgeting phase: while the premium itself is rolled into the mortgage, Ontario’s 8% Provincial Sales Tax (PST) applies to the premium and must be paid in cash at closing.
Using the example above:
Premium = $19,530
Ontario PST due on closing = $1,562.40
This amount needs to be budgeted explicitly as part of your out-of-pocket closing costs.
Step-by-Step: How Do You Qualify for CMHC, Sagen, or Canada Guaranty?
Insurers look beyond just your annual income—they assess the overall strength and stability of your financial file:
Ontario Buyers: Why This Matters
Mortgage default insurance can feel like an extra expense—but for many buyers, it acts as a valuable tool that unlocks:
Lower down payment requirements, keeping more cash in your reserves.
Stronger, highly competitive mortgage interest rates.
An earlier entry point into the Ontario real estate market.
For buyers across the Greater Toronto Area—including Brampton, Mississauga, Milton, and Whitby—understanding these guidelines before you start shopping can save substantial stress and help you build a clear, bulletproof budget.
Whether you’re buying your first home, moving up to a larger property, or comparing insured vs. conventional financing, understanding mortgage default insurance early helps you make better decisions—and avoid surprises on closing day.
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