What is CMHC insurance? — what mortgage loan insurance actually does

It does not. This is the single most common misunderstanding in Canadian home buying, and it is worth being blunt about: mortgage loan insurance protects the lender. CMHC's own wording is that it "protects your lender in case you can't make your payments."

You pay the premium. The lender is the one insured. If you default, the insurance makes the lender whole — it does not clear your debt, and you can still be pursued for a shortfall. Nothing about this arrangement is hidden, but the word "insurance" does a great deal of work in the wrong direction, and plenty of buyers reach closing believing they have bought themselves a safety net.

What it genuinely does for you is different, and still valuable: it is the mechanism that lets you buy with less than 20% down at all. Without it, a lender would not make that loan at that rate. You are buying access, not protection.

You need it when your down payment is under 20% of the purchase price. At 20% or more, it does not apply and you pay no premium.

The minimums that decide whether you can buy at all:

• 5% down on a home priced at $500,000 or less.
• 5% on the first $500,000 and 10% on the portion above it for homes above that price.
• At $1,500,000 or more, insurance is not available — which in practice means at least 20% down, because no insured mortgage exists at that price.

The premium is a percentage of the mortgage, and the percentage rises as your down payment shrinks. It is normally added to the mortgage rather than paid at closing — which means you pay interest on it for the life of the loan. In Ontario there is a sting in the tail: provincial sales tax on the premium cannot be rolled in and is payable in cash at closing. Ask your lawyer for that figure early, because it lands in the same week as everything else.

Our CMHC premium calculator estimates the premium and applies the minimum-down rules; the closing costs calculator is where the cash-at-closing side belongs. If the question underneath this one is how much you actually have to save, that is how much down payment do you need in Ottawa — including where the money is allowed to come from.

CMHC is Canada's federal housing agency, and mortgage loan insurance is only its most visible function. It also publishes housing research and market data — genuinely useful, and refreshingly free of anyone's sales incentive — and it maintains the public information on the federal prohibition on residential purchases by non-Canadians.

Two things it is not. It is not your lender: it sets insurance rules, but your rate, your approval and your terms come from the bank or broker. And it is not the only insurer — private mortgage default insurers operate in Canada too, and your lender may place your file with one of them. The rules are broadly similar; the name on the premium may differ.

CMHC — what mortgage loan insurance is · CMHC

Verified against CMHC on July 25, 2026.