Insurance
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Buying a home with less than 20% down? Then chances are you’ll also be buying home loan mortgage insurance.
This guide breaks down when it’s required, what it actually covers, how premiums work, and how it differs from home insurance and mortgage life insurance.
In plain terms, this insurance benefits the lender; if you default, the insurer covers the lender’s loss. You may still be responsible for the shortfall, depending on provincial rules
In Canada, it’s commonly called mortgage default insurance or Canada Mortgage and Housing Corporation (CMHC) insurance.
Mortgage insurance exists because loans with small down payments are riskier. Under federal rules, lenders can’t approve mortgages above 80% loan-to-value (LTV) without insurance.
The system is backed by the federal government through:
As of March 31, 2023, government-guaranteed mortgage insurance in Canada totalled $661 billion.
Your lender arranges the insurance when your mortgage is approved, chooses the insurer, and adds the premium to your mortgage.
In most cases:
Even if your home value rises or you eventually have more than 20% equity, the insurance doesn’t disappear unless you refinance.
The insurer also has to approve your loan. CMHC, Sagen, and Canada Guaranty each apply their own underwriting rules alongside your lender’s.
When your down payment is less than 20% of the purchase price. If you put down less than 20%, mortgage insurance is typically mandatory at federally regulated lenders.
Even with 20% down, some lenders may still require insurance for higher-risk borrowers, such as self-employed buyers, borrowers with weaker credit, or non-standard income situations.
Mortgage insurance premiums are based on your LTV ratio. The smaller your down payment, the higher the premium.
For standard owner‑occupied homes, premium rates generally look like this:
For example,
Let’s say you buy a $500,000 home:
Most people roll this premium into their mortgage and pay interest on it over time.
Ontario, Quebec, Manitoba, and Saskatchewan charge provincial sales tax on the premium itself.
Watch for: The sales tax on your premium, as it must be paid in cash at closing and can’t be added to your mortgage.
It covers your lender’s loss if you default and the sale of your home doesn’t repay the full mortgage balance.
Mortgage insurance covers your lender’s loss if you default on your mortgage, and the sale of your home doesn’t fully repay what you owe.
If that happens, the insurer pays the lender the shortfall. The lender is protected, but on the otherhand, you lose your home, may still owe money, or don’t receive any payout.
This doesnt cover your mortgage payments if you lose your job, pay off your mortgage if you die, cover disability or illness, protect your home from fire, water damage, or theft.
Those fall under standard mortgage life insurance and home insurance, which are completely separate products.
Home insurance protects your property, and mortgage insuranceprotects your lender. These two get mixed up all the time. Here’s the difference:
Aspect
Home Insurance for Mortgage
Mortgage Insurance
Purpose
Protects your home and belongings from damage
Protects the lender from default
Who It Covers
You
Your lender
What It Covers
Fire, theft, water damage, liability claims, and additional living costs
Lender’s loss after foreclosure
When Required
Required by lenders
Required by law for <20% down
Payment
You pay monthly or annual premiums
Premium is typically added to your mortgage
Removal
No, while you have a mortgage
No, unless you refinance
Common Confusion
People think this pays the mortgage if they die
People think this protects them if they can’t pay
Home insurance protects the property. Mortgage insurance protects the lender’s money.
You can read more about property protection requirements in homeowner’s warranty insurance.
The term “home mortgage protection” can mean different insurance products. Three main types exist in Canada, though they function differently from the mortgage loan insurance discussed above.
In Canada, PMI refers to mortgage default insurance provided by Sagen and Canada Guaranty. Together, these two private insurers held $261 billion in insurance-in-force as of March 31, 2023.
Your lender chooses the insurer. Premium rates are broadly similar across all three providers.
CMHC provides insurance backed directly by the federal government. It’s the only insurer for multi-unit residential properties like multi-unit buildings, student housing, and seniors’ residences.
CMHC’s insurance-in-force reached $440 billion by the end of 2024. Mortgage arrears on CMHC-insured mortgages were just 0.32% in the first nine months of 2025.
Some lenders pay the insurance premium themselves and offset the cost with a higher interest rate.
You can’t remove mortgage loan insurance once it’s on your mortgage. The only way to remove it is to refinance once you reach 20% equity.
Once mortgage insurance is on your loan, you can’t cancel it. The only way out is to refinance into a new uninsured mortgage after reaching 20% equity. That means new legal fees, appraisal costs, and possibly a different interest rate.
The best way to reduce mortgage insurance is to make a bigger down payment and move up a premium tier.
For example, going from 5% to 10% down on a $500,000 home saves roughly $5,000 in premiums.
Mortgage insurance lets you buy with less cash up front, but it increases your long-term borrowing cost
The upside
A $19,000 premium financed over 25 years at 5.5% interest can cost roughly $34,000 in total payments.
For more details on maintaining proper coverage, check out home insurance questions.
Your down payment was under 20%. Federal rules require insurance for high‑ratio loans.
It doesn’t cover you, but your lender’s loss if you default and the home sale doesn’t repay the full mortgage balance.
No. Mortgage life insurance pays your mortgage if you die. Mortgage loan insurance protects the lender.
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