Should you put more down if the rate is higher?

A down payment of 20% means your mortgage is uninsured and in a higher rate category.

But don't despair. A bigger down payment typically saves you money compared to a smaller one with an insured mortgage. Here's how your down payment and interest rate are intertwined.

Nov 26, 2025

Updated from April 2, 2024

The (rate) opposite of what you were expecting?

If you're aiming for a 20% (or more) down payment, it's natural to assume you'll get a lower mortgage rate. More money in your house should mean a better deal, right?

But that larger down payment puts your mortgage in the conventional category, which is an uninsured mortgage. There's no default-insurance premium added to your balance (required for down payments under 20%), but it also means the lender takes on more risk, and that shows up in a higher rate.

So, with that higher rate, is it still worth saving up, gathering gifts, or stretching your finances to put more down than the minimum required for your home purchase?

Key Takeaways:

A 20% down payment means a conventional (usually uninsured) mortgage, typically with a higher rate — but a smaller loan.
Borrowing less often puts you ahead, even if an insured rate is lower.
Your payment could be lower and you’ll owe much less at renewal.
You avoid the default insurance premium and start with stronger equity.

The answer is: yes.

Can you comfortably afford a bigger down payment? If you can, despite a potentially higher uninsured mortgage rate, you'll likely be further ahead financially than with a smaller down payment, an insured mortgage, and a potentially lower rate.

Here's why a bigger down payment, for an uninsured mortgage, makes more sense:

Your monthly payment may be lower, offering more budget room.
You'll owe far less at renewal (≈$30K less in the example and table below).
Your equity position is stronger.
Tax has already been paid on your bigger down payment — you would need to make a lot more pre-tax income (depending on your tax bracket) to make up both the down payment deficit and the premium added to an insured mortgage.

Insured mortgage benefit? It may not last:

Your insured mortgage rate may not be much lower than an uninsured rate (depending on your details).
Only a much lower insured rate over several terms might make up the difference in paying the premium required by a default-insured mortgage, while also putting less down.
The insured rate benefit could quickly disappear — most homeowners sell or refinance, which breaks the lower rate advantage, and you're still stuck with a higher principal amount.

Comparing a 15% and a 20% down payment — which one puts you ahead?

Here's an example using a $500K home purchase price, 25-year amortization, and 5-year fixed rates.

With an uninsured mortgage, your principal would be over $29,500 lower after your first term than with 15% down and a lower insured rate.

	Insured Rate – 3.79%	Uninsured Rate – 4.19%
Down payment	$75,000 (15%)	$100,000 (20%)
Required insurance premium	$11,900	$0
Mortgage starting balance	$436,900	$400,000
Mortgage payment	$2,249	$2,145
Interest paid (5 years)	$76,958	$78,087
Principal paid (5 years)	$57,965	$50,641
Mortgage balance after 5 years	$378,935	$349,358
Difference in balance after 5 years		lower by $29,577
Total paid over 25 years	$674,700 ($425,000 principal + $11,900 insurance + $237,800 interest)	$643,500 ($400,000 principal + $243,500 interest)

You’d need roughly $46K to $56K in gross income (depending on the province) to make up the $29,500 net reduction of your mortgage principal due to the larger down payment. Or, put in mortgage terms, it would take about 3.5 years of payments (42 x $2,249) to make up that difference.

"I tell our clients that if you have a choice (they don't always), put at least 20% down on your home purchase. It can instantly put you ahead to save more — with less interest, more equity, and a faster path to that mortgage-burning party."
– Dan Eisner, True North Mortgage Founder and CEO

Why does 20% down classify your mortgage as conventional?

An uninsured mortgage is also called a conventional mortgage. Once you put 20% down, the loan no longer needs default insurance from CMHC (the government housing agency) or the private Canadian insurers Sagen and Canada Guaranty.

That 20% is viewed as the tipping point, the amount lenders can rely on if things go wrong. If a borrower defaults and the home is sold, the lender is more likely to recover the loan balance from the sale proceeds. (The borrower is still fully liable for the mortgage.)

By contrast, an insured mortgage is a high-ratio loan — also known as a CMHC mortgage, the most common mortgage insurer in Canada. It allows buyers to put as little as 5% down (depending on the home's price), while the lender is protected by government-guaranteed default insurance if the borrower can't repay.

Why are uninsured mortgage rates higher than insured rates?

Uninsured mortgage rates are higher because lenders assume greater risk by holding these mortgages. Federally regulated lenders must hold a set amount of capital for every mortgage they fund — the higher the loan-to-value (LTV), the more capital they have to retain.

Mortgages eligible for default insurance don't pose this same risk, and if they weren't government-backed, down payments under 20% either wouldn't be allowed or would come with much higher rates than they do now.

Even with a 'larger' 20% down payment, your LTV is still 80% (you're providing 20% in cash, and 80% is coming from a lender), and your rate is set accordingly (i.e. higher). Once you hit the conventional mortgage category, you'll only have some rate wiggle room through your application details, for example, if you have an excellent credit score.

But a higher rate doesn’t automatically mean you’ll pay more over time, because your mortgage balance will be lower. A larger down payment can still put you ahead in your financial goals.

What is an 'insurable' mortgage?

An insurable mortgage is a conventional mortgage (20% or more down) that meets other rules for default insurance (such as 25-year amortization and home price under $1M), even though you won't be required to pay the premium.

This type of mortgage typically falls between insured and uninsured rates.

A lender can choose to insure this type of mortgage on the back end (usually in bulk), allowing borrowers with stronger applications to access these lower rates.

What are the other benefits of a bigger down payment?

With more equity in your home, you may have access to more options, such as extending your amortization.
A lower loan balance means lower interest costs over time, saving you mortgage cash.
A lower balance means less to pay off (assuming you don't refinance later) if you use your pre-payment privileges to put more down over time.

These additional uninsured mortgage benefits can make your mortgage lighter, simpler, and easier to manage over the years.

Are there drawbacks to a bigger down payment?

Probably the biggest drawback of saving or gathering a larger down payment is the potential delay in your first home purchase.

Getting into the real estate market — owning instead of renting — can offer several significant financial and personal benefits, such as greater budget stability from avoiding annual rent increases and the opportunity to build long-term wealth through an investment in a financial asset (aka your dream home).

Not every home buyer or owner has the luxury, or chooses, to put more down on their home. Your solution lies in what makes the best sense for your situation.

Are there perks with a smaller down payment?

Yes. A high-ratio, insured mortgage has its own advantages for buyers who can’t reasonably pull together 20% down payment, especially in higher-priced markets.

Placing less than 20% down (as little as 5%, depending on the home price) can help:

First-time buyers get into the market sooner, breaking the rent cycle to start building equity.
Buyers purchase a second home for work, recreation, or to generate rental income.
You can often access the lowest advertised mortgage rates, which help offset the required default-insurance premium.
Your insured-rate benefit continues at each renewal, as long as you keep the same basic mortgage structure (no refinance or amortization extension).
First-time and newly-built home buyers can extend their mortgage from 25 to 30 years to lower their payments.

Big or small — your best rate matters.

The actual rate you get can depend on many factors, such as your down payment size, credit score, income source, purchase price, home's location, and amortization.

Our friendly, expert brokers can run the numbers for you, shopping several banks, non-bank lenders (Mortgage Finance Corporations), and alternative and private lenders on your behalf.

We're here to help you outline your choices for the best solution for your unique situation. Plus, we pass along a volume rate discount for your best conventional or insured mortgage rate.