What to Know About Mortgage Default Insurance
Any time a buyer puts less than 20% down on a home in Canada, default insurance is required. This applies whether you’re buying your first home or moving up to a larger property.
The insurance doesn’t protect you—it protects the lender in case of default. But the benefit for buyers is that it makes it possible to qualify for a mortgage with as little as 5% down. Without it, 20% would always be the minimum.
How the Premium Works
The insurance premium is a percentage of the mortgage amount, and it’s added directly to your loan. You don’t need to pay it out of pocket—it’s rolled into your mortgage and spread out over your payments.
Here are the current premium rates based on down payment size:
-
5% down – 4.00% of the mortgage amount
-
10% down – 3.10% of the mortgage amount
-
15% down – 2.80% of the mortgage amount
The more you put down, the lower the premium.
Situations Where Premiums Increase
Some circumstances add to the cost:
Why It’s Useful
While default insurance adds a cost to your mortgage, it’s the tool that allows Canadians to buy homes without needing a full 20% down payment. For many buyers, this means entering the market sooner, keeping savings available for renovations, or holding on to cash for an emergency fund.
[Click here to see what your down payment options look like]
FAQ
Do I have to pay default insurance up front?
No. It’s added to your mortgage balance and repaid over time through your regular payments.
Who provides the insurance?
There are three providers in Canada—CMHC, Sagen, and Canada Guaranty. Your lender arranges it automatically.
Can I avoid it?
Yes—by putting at least 20% down. But for many, the trade-off is worth it to buy sooner or keep more cash available.
Final Thoughts
Default insurance is a key part of the Canadian mortgage system. It may feel like an extra cost, but without it, buying a home with less than 20% down wouldn’t be possible. Understanding how the premiums work can help you plan your down payment and decide the best strategy for your situation.
[Click here to start your application and see your qualifying amount]