The Takeaway
- Insurance protects the lender, not you. It is mandatory with less than 20% down.
- Insured rates are often lower. The bank's risk is lower, so they offer better rates.
- The 8% PST Trap. In Ontario, the PST on the premium must be paid in CASH on closing day.
- 30-Year Amortization. Now available for New Home Buyers on new builds with insured mortgages.
If you are buying your first home in Ontario with less than 20% down, mortgage default insurance is not optional — it is a legal requirement. Most buyers know it as "CMHC insurance," though it is also offered by two private providers Sagen and Canada Guaranty. What most buyers do not know is exactly what it costs, what it actually protects, and how to use it strategically to your advantage.
This guide covers the full picture: current 2026 premium rates, the Ontario PST trap that blindsides buyers at closing, when a 30-year amortization makes sense, and the honest math behind whether saving for a larger down payment is actually worth it.
What CMHC Insurance Actually Is — and What It Isn't
This is the most important distinction most guides skip: CMHC insurance protects your lender, not you.
If you default on your mortgage and the bank sells your home for less than the outstanding balance, it is the insurer — CMHC or a private equivalent — that covers the bank's loss. You are still fully liable for the debt. Mortgage default insurance does not protect your equity, your credit score, or your ownership position.
What it does do is make low-down-payment lending possible at all. Under federal banking law, Canadian lenders cannot extend a mortgage that exceeds 80% of a property's value without it being insured. Without default insurance, the minimum down payment in Canada would effectively be 20% for any major bank — locking the vast majority of New Home Buyers out of the market entirely.
So while it is an added cost, it is also the mechanism that makes early market entry viable. The strategic question is not whether to get it, but how to minimize its total cost given your specific situation.
Who Provides It: CMHC, Sagen, and Canada Guaranty
Three companies provide mortgage default insurance in Canada:
- CMHC — Canada Mortgage and Housing Corporation, a federal Crown corporation
- Sagen — formerly Genworth Canada, now privately held
- Canada Guaranty — private insurer
Your lender chooses the provider at underwriting — you do not select it. The premium rates are identical across all three, and the eligibility requirements are functionally equivalent. The CMHC name has simply become the colloquial shorthand for the product, regardless of which company actually underwrites your policy.
2026 Premium Rates by Down Payment Tier
The premium is calculated as a percentage of your insured mortgage amount (purchase price minus down payment), not the full purchase price.
| Down Payment | Loan-to-Value (LTV) | Premium Rate |
|---|---|---|
| 5.00–9.99% | 90.01–95% | 4.00% |
| 10.00–14.99% | 85.01–90% | 3.10% |
| 15.00–19.99% | 80.01–85% | 2.80% |
| 20%+ | 80% or less | Not required |
Additional surcharges:
- 30-year amortization: +0.20% added to the base premium rate
- Non-traditional down payment sources (e.g., borrowed funds, non-immediate family gifts): +0.50% at the 5–9.99% tier
Real example — $700,000 home with 5% down:
| Purchase price | $700,000 |
| Down payment (5%) | $35,000 |
| Insured mortgage | $665,000 |
| Premium (4.00%) | $26,600 |
| Total mortgage balance | $691,600 |
| Ontario PST (8% cash at closing) | $2,128 |
The True Cost: Premium vs. Interest Over Time
The $26,600 premium in the example above is not what you actually pay — it is capitalized into your mortgage and accrues interest for the full amortization period.
At a 5% mortgage rate over 25 years, that $26,600 premium grows to roughly $46,000–$48,000 in total principal and interest payments. That is the real price of entering the market with 5% down rather than 20%.
This math is uncomfortable, but context matters enormously. In Ontario's market, a buyer who waited three additional years to save a 20% down payment would likely have paid tens of thousands more in rent while the property appreciated. The break-even analysis between "pay the premium now" and "save longer" depends entirely on your local market trajectory, your current rent, and your income growth — not just the premium number in isolation.
Use our Mortgage Affordability Calculator to model both scenarios with your specific numbers.
Ontario's PST: The Closing Day Cash Surprise
This is the most commonly overlooked line item in Ontario closing costs, and it catches New Home Buyers off guard more than almost anything else.
The PST rule: Ontario charges 8% Provincial Sales Tax on your mortgage default insurance premium. Unlike the premium itself, the PST cannot be rolled into your mortgage — it must be paid in cash to your lawyer on closing day.
On a $26,600 premium, that is $2,128 due at closing with no financing option.
Quebec and Saskatchewan also charge provincial sales tax on mortgage default insurance. Every other province does not. If you are comparing closing cost guides from other provinces, this line item will be absent — do not use those estimates for an Ontario purchase.
What to do: Include the PST calculation in your closing cost budget from day one. Use our Closing Cost Estimator to get a property-specific breakdown including PST before you submit an offer.
The Rate Advantage of Being Insured
Here is the counterintuitive part of CMHC insurance that most buyers miss: insured mortgages often come with lower interest rates than uninsured mortgages.
Because the lender's risk is fully backstopped by the insurer, an insured mortgage is effectively a risk-free loan from the bank's perspective. Lenders compete aggressively for insured borrowers, and the rates they offer reflect that. The spread between the best insured and uninsured rates is typically 0.10–0.40% depending on market conditions.
On a $665,000 mortgage, a 0.25% rate difference translates to roughly $80–$100 per month in lower payments — or approximately $6,000–$7,500 over a 5-year term. This partially, and in some market conditions substantially, offsets the premium cost.
30-Year Amortization: Who Qualifies and What It Costs
As of December 15, 2024, two categories of buyers can access a 30-year amortization on insured mortgages:
- New Home Buyers (as defined by the CRA and FHSA eligibility rules)
- Buyers purchasing a newly constructed home (new builds, pre-construction)
This was a meaningful policy expansion. Previously, all insured mortgages were capped at 25 years.
The trade-off: Choosing 30 years over 25 years adds a 0.20% surcharge to your base premium rate. So a New Home Buyer with 5% down would pay 4.20% instead of 4.00%. On a $665,000 insured mortgage, that is approximately $1,330 more in premium (plus the PST on that increase).
In exchange, you get a meaningfully lower monthly payment — which can be the difference between qualifying under the stress test and not qualifying at all. For buyers on the edge of their stress-tested limit, the 30-year amortization is worth the surcharge.
Note: The extended amortization does not change the stress test qualifying rate. You still qualify at the greater of 5.25% or your rate + 2%, regardless of your chosen amortization.
Down Payment Strategy: When to Stretch, When to Stop
The premium tiers create three natural decision points: 5%, 10%, and 15%. Here is the honest analysis of each jump.
From 5% to 10%
Moving from 5% to 10% drops your premium from 4.00% to 3.10% — a reduction of 0.90 percentage points. On a $700,000 purchase, this saves roughly $6,000 in premium (before interest), and lowers your insured mortgage balance by $35,000. This is usually the most cost-effective tier jump if you have the savings available.
From 10% to 15%
Dropping from 3.10% to 2.80% saves 0.30 percentage points — a smaller relative benefit. For most buyers, the cash deployed to hit 15% generates more value if retained as an emergency fund or invested in an FHSA for future tax deductions.
From 15% to 20%
Eliminating the premium entirely requires a substantial additional outlay. In a $700,000 purchase, the difference between 15% and 20% down is $35,000 in additional cash. Whether that capital is better deployed as a larger down payment or preserved for other uses — renovations, investment, liquidity buffer — is a decision that should be modelled with your mortgage broker, not made based on the premium savings alone.
The Rule of Thumb
Never stretch your liquidity so thin to hit a premium tier that you arrive at closing with no cash reserve. A buyer who waives their emergency fund to hit 10% down and then faces a $15,000 roof replacement in year one is worse off than the buyer who put 5% down and kept $35,000 liquid.
How to Minimize or Avoid the Premium
1. Stack FHSA and RRSP HBP Contributions
The fastest path to a larger down payment — and a lower premium tier — is maximizing your FHSA ($40,000 lifetime) and RRSP Home Buyers' Plan ($60,000) contributions before you buy. A couple that has fully used both can access up to $200,000 in tax-advantaged down payment capital, potentially clearing the 20% threshold entirely on a moderately priced home.
2. CMHC Eco Plus: 25% Premium Refund
If you purchase an energy-efficient home or undertake qualifying energy-efficiency renovations after purchase, CMHC offers a 25% partial premium refund under its Eco Plus program. This is underused and worth asking your broker about if you are buying a new build or planning significant upgrades.
3. Some Credit Unions Opt Out
Provincially regulated credit unions are not subject to the same federal lending rules that mandate mortgage insurance. Some offer conventional (uninsured) mortgage products with less than 20% down. These "portfolio mortgages" may carry slightly higher rates, but they bypass the premium entirely. Availability varies — ask your broker whether this is an option in your situation.
4. Pay the Premium Upfront
Rarely feasible for New Home Buyers, but if you have the liquidity: you can opt to pay the full premium in cash at closing rather than capitalizing it into your mortgage. This eliminates all interest charges on the premium and reduces your total cost meaningfully. On a $26,600 premium at 5% over 25 years, you save approximately $18,000–$20,000 in interest.
The Bottom Line
CMHC mortgage insurance is not a penalty for being a New Home Buyer — it is the mechanism that makes early homeownership mathematically possible. The premium is a real cost, but it needs to be evaluated against the full picture: the lower rates insured mortgages command, the equity you build by entering the market earlier, and the tax-advantaged tools available to build your down payment over time.
The buyers who get hurt are those who misunderstand the Ontario PST obligation, over-stretch to hit a premium tier at the expense of their cash reserves, or confuse default insurance with personal mortgage protection.
Know the numbers, plan your closing costs carefully, and use our Closing Cost Estimator and Mortgage Affordability Calculator to stress-test your budget before you make an offer.
First Home Ontario is an independent research platform. We are not a real estate brokerage or government agency. All figures current as of March 2026. Program terms and premium rates are subject to change — verify current rates with your lender or mortgage broker before making financial decisions.