Active Mortgage · Guide
Mortgage default insurance in Canada
If your down payment is less than 20% of the purchase price, your mortgage will need default insurance. It's what makes buying with a smaller down payment possible. Here's how it works.
What it is
Mortgage default insurance protects the lender — not you — if a borrower stops paying. In Canada it is provided by CMHC and private insurers. Because the lender's risk is covered, borrowers can buy with less than 20% down and often access competitive rates.
When it's required
Federally regulated lenders require it when the down payment is less than 20%. Insurance rules also set a maximum purchase price, a maximum amortization and a minimum down payment: [PLACEHOLDER: current insured price cap, amortization rules and minimum down payment tiers].
How the premium works
The premium is a percentage of the mortgage amount, and the percentage falls as your down payment rises. It's usually added to your mortgage rather than paid up front, so you repay it over time with interest. In some provinces, sales tax on the premium must be paid in cash on closing. Current premium rates: [PLACEHOLDER: current default insurance premium schedule].
Not the same as life insurance
Default insurance doesn't pay off your mortgage if something happens to you. That's the role of life or disability coverage, which is a separate decision. Our brokers can show you how the premium affects your payment and compare a smaller down payment against waiting to save more.
An example of how the premium is added
Imagine you buy a home with less than 20% down. Your mortgage before insurance is the price minus your down payment. The insurer's premium — a percentage of that amount — is then added, so your total mortgage is a little higher than the amount you actually borrowed for the home. Your payment is calculated on the total.
Our home buying cost calculator shows this step by step using example premium tiers, so you can see how different down payments change the premium, the mortgage and the monthly payment.
Is a smaller down payment worth it?
Buying sooner with less down means paying a premium and a slightly larger mortgage. Waiting to save more means continued rent and the possibility that prices or rates change in the meantime. There's no single right answer. Our brokers can compare both paths with your numbers.
How our brokers can help
Active Mortgage is a team of brokers working with a range of lenders. We can review your situation, explain the options that apply to you and compare real offers side by side. There's no cost to talk with us, and you're never under pressure to proceed.
Common questions
Can I avoid default insurance?
Putting 20% or more down generally means you won't pay the premium.
Is the premium refundable?
Generally not, though some insurers offer partial refunds in specific situations such as energy-efficient homes. Ask your broker.
Which insurer will my mortgage use?
Your lender chooses the insurer. Premiums are broadly similar between them.
Related tools and services
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