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Mortgage Default Insurance in Canada: What Homebuyers Are Paying For

October 5, 2026

Learn when mortgage default insurance is required in Canada, how its premium works, and how to weigh a smaller down payment against waiting.
Mortgage insurance

By Josh Tagg, mortgage broker · Mortgages for Less with INDI Mortgage · Calgary, serving all of Alberta ·

Mortgage insurance is one of those costs that can surprise buyers. You may need to pay for it, but the policy protects your lender. So what are you getting in return?

I’m talking about mortgage default insurance, often called “CMHC insurance.” It allows eligible buyers to purchase a home with less than 20% down. It is different from mortgage life insurance, which is intended to pay off a mortgage if a borrower dies.

Quick answer: Mortgage default insurance is generally required when your down payment is less than 20%. It protects the lender, not you, but it is what lets you buy with as little as 5% down on a home of $500,000 or less. The premium is a one-time cost, paid upfront or added to the mortgage. On a $600,000 home with $35,000 down, CMHC’s standard 4% premium is $22,600. Homes priced at $1.5 million or more aren’t eligible and need at least 20% down.
<20%
Down payment that generally triggers default insurance
5%
Minimum down on a home of $500,000 or less
4%
CMHC standard premium in the post’s $600,000 example
$1.5M
Price at which insurance is no longer available

When do you need mortgage default insurance?

Hand holding a pen over a black calculator beside a small model house with a red roof and stacks of coins
The minimum down payment is tiered: 5% on the first $500,000 and 10% on the portion above it.

If your down payment is less than 20%, mortgage default insurance is generally required. For a home priced at $500,000 or less, the minimum down payment is 5%. Above $500,000, you need 5% on the first $500,000 and 10% on the portion above that. Homes priced at $1.5 million or more are not eligible for this insurance and require at least 20% down.

For example, the minimum down payment on a $600,000 home is $35,000: $25,000 on the first $500,000, plus $10,000 on the remaining $100,000. That gets you to the minimum down payment, but you would still need default insurance because you’re putting down less than 20%.

How much does mortgage default insurance cost?

The premium depends largely on your mortgage amount and the size of your down payment. It’s a one-time cost that you can usually pay upfront or add to the mortgage. If you add it to the mortgage, you’ll also pay interest on that added amount over time.

Using the $600,000 example, a $35,000 down payment leaves a $565,000 mortgage before insurance. At CMHC’s standard 4% premium for that down payment range, the premium would be $22,600. Added to the mortgage, that would bring the starting balance to $587,600. The exact cost can differ depending on the insurance product and mortgage details.

The $600,000 example, step by step
Purchase price$600,000
Minimum down payment (5% of $500,000 + 10% of $100,000)$35,000
Mortgage before insurance$565,000
CMHC premium at 4%$22,600
Starting balance with premium added$587,600

Why would anyone choose to pay it?

Person signing printed documents at a wooden table, with a house-shaped key ring and keys, a coffee mug and a potted plant nearby
The premium buys time: you can own sooner instead of waiting years to save a full 20%.

The benefit is that you may be able to buy without waiting to save a 20% down payment. Insured mortgages may also come with competitive interest rates, though a lower rate does not automatically make the mortgage cheaper once you include the premium.

Some buyers also qualify for a 30-year insured mortgage amortization if at least one borrower is a first-time buyer or the home is newly built. A longer amortization can lower the required monthly payment, while increasing the interest paid if you take the full period to repay the loan.

Should you wait until you have 20% down?

That depends on your savings, the home you’re considering and what the payments would leave you each month. Reaching 20% down avoids the default insurance premium, but using every available dollar for the down payment can leave you short for closing costs, repairs and the ordinary surprises of homeownership.

When I work through this with a buyer, I’d compare the full cost of buying now with the cost of waiting, including the insurance premium, mortgage payments and cash left after closing. The useful question is not simply “Can I avoid insurance?” It’s “Which option leaves me in a comfortable financial position?”

If you have questions or want to get started on your journey to home ownership, contact me.

How an Alberta mortgage broker helps you weigh default insurance

The premium is one number in a bigger decision. Here’s what we work through together:

  • Work out your minimum down payment on the price range you’re shopping, including the 10% tier above $500,000.
  • Estimate the insurance premium and show the starting balance if it’s added to the mortgage.
  • Compare the full cost of buying now with the cost of waiting until you have 20% down.
  • Check whether you qualify for a 30-year insured amortization as a first-time buyer or on a newly built home.
  • Make sure you keep enough cash for closing costs, repairs and surprises after the down payment.
  • Compare insured rates across banks, monolines and credit unions, not just one lender.

Not sure whether to buy now or save to 20%?

We’ll run both options side by side, premium included.

Apply Online → Book a Discovery Call → Serving Calgary, Edmonton & all of Alberta · Mortgages for Less with INDI Mortgage

Questions homebuyers ask about mortgage default insurance

When is mortgage default insurance required in Canada?
If your down payment is less than 20%, mortgage default insurance is generally required. It allows eligible buyers to purchase a home with less than 20% down.
Is mortgage default insurance the same as mortgage life insurance?
No. Default insurance, often called CMHC insurance, protects your lender and allows you to buy with less than 20% down. Mortgage life insurance is intended to pay off a mortgage if a borrower dies.
What is the minimum down payment on a $600,000 home?
$35,000: 5% on the first $500,000 ($25,000) plus 10% on the remaining $100,000 ($10,000). You would still need default insurance because that is less than 20% down.
How much does CMHC insurance cost?
The premium depends largely on your mortgage amount and down payment. In the $600,000 example, a $565,000 mortgage at CMHC’s standard 4% premium costs $22,600, bringing the starting balance to $587,600 if it is added to the mortgage. The exact cost can differ by insurance product and mortgage details.
Can I add the insurance premium to my mortgage?
Usually, yes. It is a one-time cost you can generally pay upfront or add to the mortgage. If you add it, you will also pay interest on that amount over time.
Can I buy a $1.5 million home with less than 20% down?
No. Homes priced at $1.5 million or more are not eligible for mortgage default insurance and require at least 20% down.
Should I wait until I have 20% down?
It depends on your savings, the home and what the payments leave you each month. Reaching 20% avoids the premium, but using every dollar for the down payment can leave you short for closing costs, repairs and surprises. Compare the full cost of buying now with the cost of waiting.

This article is general information for Canadian homebuyers, not financial, mortgage or legal advice. Default insurance premiums, eligibility rules and amortization limits are set by the insurers and federal rules and can change; the figures above are an illustration. Please speak with a licensed mortgage professional about your specific circumstances. Mortgages for Less with INDI Mortgage.

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