Ah yes—mortgage default insurance. One of those terms that sounds serious and slightly intimidating, but once you break it down? Totally manageable.
If you’re buying a home with less than 20% down, you’ve probably heard this term tossed around (likely by me 😉). So, let’s break it down: what it is, why it exists, what it costs, and how to work it into your budget.
Spoiler alert: It’s not a “bad thing.” In fact, for most first-time buyers, it’s what makes homeownership possible.
🏡 What is mortgage default insurance?
Also known as CMHC insurance, it protects the lender, not the borrower, in case the borrower (that’s you!) can’t make the mortgage payments.
But don’t worry—this doesn’t mean the lender doesn’t trust you. It’s simply required by law in Canada for anyone putting down less than 20%.
In short:
You pay the premium
They are protected
Everyone gets access to better rates (even with smaller down payments)
💸 How much does it cost?
The premium is a percentage of your mortgage amount, based on how much you put down:
5%–9.99% down → 4.00% of your mortgage
10%–14.99% down → 3.10%
15%–19.99% down → 2.80%
So the less you put down, the higher the premium—but the more accessible homeownership becomes.
💡 Good news: This cost is usually added to your mortgage, so you don’t need to pay it upfront out of pocket.
🧠 Is it worth it?
If waiting to save 20% would take years (and keep you out of the market while prices rise), mortgage default insurance can be a strategic move.
Let’s say:
You buy now with 5% down + CMHC insurance
Your home appreciates over the next 3–5 years
You build equity while paying down your mortgage
In many cases, that’s a better path than waiting it out.
👀 What homes qualify?
To use default insurance, your home must:
Be under $1 million in purchase price
Be owner-occupied
Meet certain appraisal and condition standards
📝 Key takeaways
Mortgage default insurance helps buyers with less than 20% down get approved
It protects lenders, not buyers—but benefits both
The cost depends on your down payment and is typically rolled into your mortgage
It’s a helpful tool, not a penalty
👉 Thinking about your next move? Let’s chat mortgages + MLS® today.