Mortgage Default Insurance Canada: Costs, Rules & How It Works (2026 Guide)

Buy a home with less than 20% down and your lender is going to mention mortgage default insurance sooner or later, usually right before an extra few thousand dollars shows up on the loan. This isn’t optional once your down payment drops below that 20% line, and you can’t shop around for a better rate either. Three insurers set the terms, the federal government sets the prices, and every high-ratio buyer in the country pays into the same system. Here’s how the premium actually gets calculated, who’s on the hook for it, and where a buyer still has some room to bring the cost down.

What Is Mortgage Default Insurance in Canada?

Mortgage default insurance protects the lender, not you, if you stop making payments. The federal government requires it on any purchase where the down payment falls below 20% of the price. Once a lender’s protected against that loss, they can approve buyers who couldn’t otherwise pull together a full 20%. That’s the trade: you get into a home sooner, and the lender gets covered, in exchange for a premium you pay.

And it’s real money. Buy a $500,000 home (roughly USD $365,000) with 5% down, and you could be looking at close to $19,000 in insurance fees, tacked onto the loan rather than paid out of pocket at closing. The rate, the formula, who collects the payment: none of it is negotiable with your bank.

Who Needs Mortgage Default Insurance?

If your down payment is under 20% of the purchase price, you need it. That’s called a high-ratio mortgage, and federal rules make the insurance mandatory no matter which bank or lender you’re working with.

Put down 20% or more and you generally skip this cost entirely. Your mortgage counts as conventional, though a handful of lenders will still ask for insurance on files they consider riskier (a self-employed applicant with irregular income, say). One hard line: properties priced at $1.5 million or above can’t be insured under any circumstances, even with a tiny down payment. Buyers at that price point need 20% down, full stop.

Which Companies Provide Mortgage Default Insurance in Canada?

Three: the Canada Mortgage and Housing Corporation (CMHC), Sagen, and Canada Guaranty. CMHC is a Crown corporation, so it’s federally owned. Sagen used to be Genworth Financial Canada before the rebrand, and Canada Guaranty is privately held and has stayed independent of government ownership.

All three charge identical premium rates and follow nearly identical borrower requirements, because the federal Department of Finance sets the pricing structure everyone uses. Your lender picks the insurer, not you, and honestly it rarely changes what you pay out of pocket either way.

How Much Does Mortgage Default Insurance Cost?

Somewhere between 0.60% and 4.00% of your mortgage amount, depending on your loan-to-value (LTV) ratio. LTV is just how much you’re borrowing against the home’s price. Smaller down payment, higher LTV, bigger premium. It’s a straight line.

Premium Rate Table by Loan-to-Value Ratio

Loan-to-Value Ratio	Premium on Total Loan Amount
Up to 65%	0.60%
Up to 75%	1.70%
Up to 80%	2.40%
Up to 85%	2.80%
Up to 90%	3.10%
Up to 95%	4.00%

Choose a 30-year amortization instead of 25, and you’ll pay an extra 20 basis points on top of these rates. That option’s only open to first-time buyers and buyers of newly built homes. It lowers your monthly payment but raises the total premium, so it’s a real trade-off, not a free upgrade.

How Is the Premium Calculated? (Worked Example)

Divide your mortgage amount by the home’s purchase price to get your LTV ratio, then multiply the mortgage amount by the matching rate. Same math regardless of which of the three insurers ends up underwriting the policy.

Say you’re buying a $400,000 home (about USD $292,000) with 5% down, or $20,000. Subtract that from the price and you’re borrowing $380,000, which works out to a 95% LTV. At the 4.00% rate for that tier, the premium comes to $15,200. Most lenders just add that straight to your mortgage balance, so you’d actually be borrowing $395,200, not $380,000, and interest accrues on that premium for the life of the loan.

Who Pays the Premium, and How?

You do, and it’s almost always financed into the mortgage rather than paid as a lump sum. Your lender calculates it at closing, sends it to the insurer, and folds the cost into your loan principal. You pay it off gradually through your regular mortgage payments, over the full amortization period.

Provincial sales tax is a different story. Homebuyers in Ontario, Quebec, Manitoba, and Saskatchewan owe PST on the insurance premium itself, and that tax can’t be rolled into the mortgage. It has to be paid in cash at closing, on top of legal fees, land transfer tax, and whatever else is already piling up on the buyer’s plate.

What Are the Eligibility Requirements?

To qualify, you need a credit score of at least 600, a Gross Debt Service (GDS) ratio under 39%, and a Total Debt Service (TDS) ratio under 44%. These thresholds are the same across all three insurers, since federal underwriting rules set the floor.

A few other conditions apply on top of that:

• The home has to be owner-occupied, with no more than two residential units.
• Purchase price under $1.5 million.
• Down payment funds can’t come from a personal loan or line of credit.
• The mortgage has to pass the federal stress test, which checks whether you could still afford payments at a higher interest rate.
• Amortization is capped at 25 years, extended to 30 only for first-time buyers and new construction.

Every insured mortgage also has to meet OSFI’s B-20 guideline, the federal framework governing how banks underwrite residential mortgages across the country.

How Have the Rules Changed in Recent Years?

Rules tightened sharply in 2020, then loosened again the following year. On July 1, 2020, CMHC raised its minimum credit score from 600 to 680 and tightened its debt-ratio limits, a response to pandemic-era uncertainty. Sagen and Canada Guaranty didn’t follow suit, and buyers noticed fast: within months, a large share of high-ratio borrowers had drifted toward the two private insurers instead of CMHC.

CMHC reversed course on July 5, 2021, restoring the 600 credit score minimum and the original debt-ratio caps. Those numbers still hold today. A separate change landed on December 15, 2024, when the maximum insurable purchase price rose to $1.5 million and 30-year amortization opened up to first-time buyers and new-construction purchasers, both aimed at helping buyers cope with rising prices in expensive markets.

Pros and Cons of Mortgage Default Insurance

Pros

• Lets you buy with as little as 5% down, years before you’d otherwise save 20%.
• Often unlocks a lower interest rate, since insured mortgages carry less risk for lenders.
• Spreads the cost across the mortgage term instead of demanding a lump sum at closing.

Cons

• Adds thousands of dollars to the total cost of the mortgage, plus interest on the financed premium.
• Reduces the equity you start out with in the property.
• Triggers a separate PST bill in four provinces, payable in cash at closing.

In a fast-moving market, plenty of buyers accept these downsides just to stop losing bidding wars while they wait to scrape together 20%.

Can You Get a Premium Refund?

Yes, if you buy or renovate an energy-efficient home. The CMHC Eco Plus program returns up to 25% of the premium you already paid, as long as the property meets CMHC’s energy performance standards.

Sagen and Canada Guaranty run comparable rebate programs, though the exact refund percentage and qualifying criteria vary a bit between insurers. Outside of energy-efficiency rebates, though, premiums are non-refundable, even if you pay off the mortgage early.

What Happens If You Switch Lenders or Move?

Your existing insurance can often transfer to a new home or lender through the insurer’s portability program, which can reduce or wipe out the premium on your next mortgage. It works when the LTV, loan amount, and amortization period stay roughly where they were on your original policy.

Switch lenders without a matching portability agreement, though, and you’re usually looking at a fresh application and a new premium calculated from scratch. Someone who ports a mortgage with no change to the loan terms might pay nothing extra. Someone who increases the loan amount during a move typically owes a top-up premium on just that increased portion.

Can You Use Default Insurance to Refinance for a Secondary Suite?

Yes, there’s a default-insured refinancing option specifically for building a legal secondary suite, available on properties valued up to $2 million with a maximum LTV of 90%. It sits outside the standard purchase-insurance rules and only applies to homeowners adding a legal rental unit, not general renovations.

A homeowner with an uninsured mortgage can tap this program to fund a basement apartment or laneway unit, picking up rental income potential while staying within federal insurance limits. Regular refinances for other purposes don’t qualify for this insurance at all.

What Happens If You Actually Default?

If you stop making payments, the lender sells the home, and the insurer covers whatever gap remains between the sale price and what’s still owed. Say a homeowner with an $850,000 mortgage balance defaults during a downturn. The lender sells the property for $750,000, leaving $100,000 still owed. The insurer pays that $100,000 to the lender, and the loss is closed out.

Here’s the part people miss: the insurer can then come after the borrower to recover what it paid. Mortgage default insurance protects the lender’s balance sheet, not your credit or your finances. A defaulted, insured mortgage still shows up on your credit report, and you can end up owing money to the insurer long after the home itself is gone.

How to Reduce or Avoid the Premium

The single biggest lever is your down payment. Push it toward 20% and your LTV drops, which either lands you in a cheaper premium tier or removes the requirement entirely. A few practical ways to get there faster:

• Use a First Home Savings Account (FHSA) or the RRSP Home Buyers’ Plan for tax-advantaged savings.
• Accept a gifted down payment from a family member, which insurers allow (borrowed funds, they don’t).
• Buy a less expensive property, or look in a market where prices sit lower relative to income.
• Wait another 12 to 18 months to save more, if the local market isn’t punishing you for the delay.

None of these change the federal formula behind the premium. They just change which tier you land in, or whether the requirement applies to you at all.

Conclusion

Mortgage default insurance exists so buyers with less than 20% down can get approved for a mortgage they’d otherwise be denied, while the risk of default shifts onto CMHC, Sagen, or Canada Guaranty instead of sitting with the lender. The premium is calculated strictly by loan-to-value ratio, runs from 0.60% to 4.00%, and gets added directly to the loan balance in most cases. Your down payment size is still the biggest lever you control: every dollar you add either drops the premium into a cheaper tier or kills the requirement outright once you hit that 20% mark.

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