CMHC Insurance

Learn what CMHC Insurance is, when it's required in Canadian real estate, how much it costs, and how it affects homebuyers with low down payments.

CMHC Insurance

May 22, 2025


What is CMHC Insurance?

CMHC Insurance, also known as mortgage loan insurance, is a government-backed insurance policy provided by the Canada Mortgage and Housing Corporation (CMHC) that protects lenders in case a borrower defaults on a high-ratio mortgage.

Why CMHC Insurance Matters in Real Estate

In Canada, homebuyers who make a down payment of less than 20% are required by law to obtain mortgage loan insurance from CMHC or another approved provider. This insurance protects the lender — not the borrower — by covering losses in the event of mortgage default.

While it doesn’t benefit the buyer directly, CMHC Insurance enables them to purchase a home with as little as 5% down, which is crucial in high-priced housing markets. It helps stabilize the housing market and reduces risk for lenders, making mortgages more accessible to Canadians with lower savings.

The cost of CMHC Insurance is based on a sliding scale tied to the loan-to-value ratio and is typically added to the mortgage principal or paid as a lump sum. Premiums range from 2.8% to 4% of the mortgage amount, depending on the size of the down payment.

Understanding CMHC Insurance is key for budgeting, especially for first-time homebuyers, and for making informed decisions about down payment strategy and overall affordability.

Example of CMHC Insurance

A buyer in Ontario purchases a $500,000 home with a 10% down payment. Since this is less than 20%, they must pay a CMHC Insurance premium of $13,950, which is added to their mortgage.

Key Takeaways

  • Required for down payments under 20%.
  • Protects the lender in case of borrower default.
  • Provided by CMHC and other approved insurers.
  • Cost is based on mortgage size and down payment.
  • Enables access to homeownership with smaller savings.

Related Terms

Additional Terms

Recourse Loan

A recourse loan is a type of loan where the lender can pursue the borrower’s personal assets, beyond the collateral, in the event of default.. more

Pari Passu

A pari passu clause is a contractual provision ensuring that multiple creditors share equally in repayment priority from the borrower’s assets.. more

Non-Recourse Loan

A non-recourse loan is a type of loan where the lender’s only remedy in case of default is to seize the collateral property; the borrower is not. more

Net Operating Income

Net operating income (NOI) is the total income generated by a property after operating expenses are deducted but before taxes and financing costs.. more

Mechanic's Lien

A mechanic’s lien is a legal claim by a contractor, subcontractor, or supplier for unpaid work or materials provided for a property.. more

Lis Pendens

Lis pendens is a legal notice filed in the land registry indicating that a property is subject to ongoing litigation that may affect its title.. more

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