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What is an Insured Mortgage?

If you have less than a 20% down payment for a home, you'll need default insurance that (usually) incurs a premium. But, there can be benefits, too. Here's what it can mean for you.

Mortgage Stress Test Update: Want to switch your insured mortgage for a better deal? Now you can be approved at just your contract rate instead of the higher stress test rate (conditions apply).

Insurance protects the lender but has benefits.

As a first-home or next-home buyer, an insured mortgage (often referred to as a 'CMHC' or 'high ratio' mortgage) is one that is federally required to be covered by mortgage default insurance because your down payment is less than 20% of the home purchase price (a Loan-to-Value (LTV) greater than 80%).

A premium based on your down payment and mortgage size is typically rolled into your mortgage amount. (Some provinces charge PST, which is paid separately as a closing cost.)

Because of the lower down payment, this insurance protects the lender against default and foreclosure — and can offer you certain benefits, such as a lower rate now and at renewal.

Please note: This type of insurance is not the same as personal Mortgage Protection Insurance.

Benefits of your insured mortgage:

  • Access to buying a home with less than 20% down payment (as little as 5% down in some cases)
  • With an insured mortgage, you may get lower rates along with flexible mortgage options
  • Insured mortgages have home price restrictions based on down payment size

Without mortgage default insurance, the lender wouldn't consider taking on a 'riskier' mortgage with less down for the loan — so it can help you get a home sooner.

Talk to your expert True North Mortgage broker in your preferred language, or apply now for your details and premium numbers.

Minimum down payment amounts requiring mortgage default insurance:

  • $500K or less – 5% of the purchase price (requires insurance)
  • $500K to $999,999 – 5% of the first $500K and then 10% for the amount over that (requires insurance)
  • $1M or more – you'll need a minimum of 20% of the total purchase price (considered a conventional mortgage and no longer requires insurance)
Min. Down Payment/Mortgage Size Example Insurance Premium*
100K Home Price $5K (5%) = 95K $3,800
300K $15K (5%) = $285K $11,400
600K $35K (5.83%) = $565K $22,584
900K $65K (7.22%) = $835K $33,372
1K $200K (20%) = $800K $0

*Premiums are typically rolled into your mortgage amount. As of June 2023, premiums are subject to change.

You're still on the hook to pay your mortgage.

If you stop paying your mortgage, you would still be on the hook for the loan — and you could lose your property through foreclosure.

If the worst happens, the lender sells the property to recoup its money, and the insurer compensates them for any principal shortfall (for example, if the home is sold for less than the mortgage amount owing). This coverage lowers the lender's risk exposure for the loan, making it more 'secure.'

Who offers mortgage default insurance?

Currently, there are three mortgage insurers in Canada:

  • CMHC (Canadian Mortgage and Housing Corporation) is a Crown corporation and the most well-known, so insured mortgages are often called a 'CMHC mortgage'
  • Sagen (formerly Genworth)
  • Canada Guaranty

Your lender will arrange to purchase your mortgage insurance through their preferred provider.

How do you pay mortgage insurance?

The above providers offer two types of mortgage insurance coverage — one you'll pay premiums on directly, and the other is paid by the lender (though you may pay a slightly higher rate):

Transactional Insurance (Insured High Ratio Mortgage)

  • A one-time premium is applied to mortgages with an LTV ratio greater than 80% (in unique situations, this premium may also be added to mortgages with lower LTVs)
  • It's usually added to your mortgage to be included in your payments (the amount is added when your mortgage is advanced)
  • Find a breakdown of CMHC's premiums here

Portfolio Insurance or Bulk Insurance (Insurable Mortgages)

  • This premium is an option for lenders on mortgages with an LTV of less than 80% or as determined by the lender
  • It is paid by the lender, with borrowers often not being aware that this coverage has been purchased
  • It is often used by Mortgage Finance Corporations (MFCs such as THINK Financial, First National, and MCAP) to offer lower mortgage rates
  • Some big banks may also consider using this type of insurance

Are default insurance premiums considered a mortgage closing cost?

Technically, no — because you're able to roll the premium into your mortgage amount and pay it as part of your mortgage payments.

Mortgage closing costs are paid for separately by your closing date (they can't be added to your mortgage) and include things like Land Transfer Tax and Adjustment Costs. If you can't come up with the funds, your deal could be in jeopardy, so make sure to budget for these expenses.

We've got you covered — with great advice and your best rate.

The rules around insured mortgages are subject to change, and there have been several changes in the past few years:

We really know mortgages. We're always up-to-date on the latest changes (for example, to the mortgage stress test) and what they mean for your situation. We can quickly set out all your details for your best mortgage experience, ever.

A few minutes with True North Mortgage could save you thousands with advice that fits you (not the lender). Give us a shout online, over the phone, or drop by a store near you.

Your better mortgage is literally a no-brainer.