Mortgage Insurance, Explained.
If your down payment is under 20%, your mortgage will likely need default insurance. Here's what that means, who provides it in Canada, how the premium is calculated, and how it factors into your overall costs — in plain English.
What it is & when it's required
General information — not advice or a commitment to lend.
What default insurance does
Mortgage default insurance protects the lender — not the borrower — against loss if the mortgage isn't repaid. It's a common feature of Canadian home financing that allows lenders to offer mortgages to buyers who put down less than a conventional (20%) down payment, because much of their risk is covered.
It's important to understand the insurance covers the lender's position. It is not life, disability, or property insurance for you.
When it's generally required
Default insurance is generally required when the down payment is less than 20% of the purchase price. These are known as high-ratio mortgages, because the loan is a high ratio of the property's value.
A mortgage with 20% down or more is typically conventional and usually does not require default insurance, though specific situations and lender guidelines vary. Whether insurance applies to your file depends on the property, your down payment, and the lender.
Who provides it
Canada has three mortgage default insurers. The following are factual references, not endorsements.
CMHC
The Canada Mortgage and Housing Corporation is a federal Crown corporation and Canada's national housing agency. It is the country's public mortgage default insurer and also publishes widely used housing market data and research. Learn more at the CMHC official site.
Sagen
Sagen is a private-sector mortgage default insurer operating in Canada. It provides high-ratio default insurance to lenders as an alternative to the public insurer, subject to its own eligibility rules and underwriting.
Canada Guaranty
Canada Guaranty is a privately owned Canadian mortgage default insurance company. Like the others, it insures high-ratio mortgages for lenders, and each insurer maintains its own product guidelines.
How premiums work
Premiums and rules are set by the insurers and change over time — this is general only.
The premium is calculated as a percentage of the mortgage amount, and the percentage is tied to your loan-to-value ratio — the size of the mortgage relative to the property value. A smaller down payment (higher loan-to-value) generally means a higher premium percentage.
Rather than paying it up front, the premium is typically added to your mortgage balance and paid off over the life of the loan. That keeps your cash-at-closing lower but means you pay interest on the premium over time.
In Ontario, provincial sales tax (PST) applies to the insurance premium. Unlike the premium itself, this tax generally cannot be added to the mortgage and is paid as part of your closing costs. Amounts vary — treat this as general information.
Because the premium follows loan-to-value, how much you put down has a direct effect on the cost. See our down payments guide to understand the trade-offs before you decide.
Pros & considerations
Why it can help
Default insurance is what makes lower-down-payment home purchases possible. Rather than waiting years to save a full 20%, many buyers are able to enter the market sooner with a smaller down payment while the lender's risk is insured.
For some borrowers, buying sooner — subject to lender approval and their own circumstances — can be a meaningful advantage in the right market.
What to consider
The premium is a real, added cost. Because it's usually rolled into the mortgage, you pay interest on it, and the Ontario PST is due at closing. A higher loan-to-value also means a larger loan overall.
The right balance between a larger down payment and buying sooner depends on your finances and goals. Final lending decisions rest with the lender and depend on the borrower, property, documentation and lender guidelines.
Related pages
Down Payments
How much you need, where it can come from, and how it affects your insurance premium.
Closing Costs
The one-time costs at closing, including PST on the insurance premium in Ontario.
First-Time Home Buyers
A plain-English roadmap for buying your first home in Ontario.
Mortgage Qualification
What lenders look at when reviewing an application.
Wondering if insurance applies to you?
Let's compare insured vs conventional for your down payment.