Understanding Mortgage Insurance in Canada
First-time buyersPart of the Coastal Blue mortgage guide
By Nick Atwal
2-Minute Summary
Mortgage default insurance (CMHC, Sagen, Canada Guaranty) is mandatory with down payments under 20%.
Premiums can add tens of thousands to your mortgage if not managed carefully.
Avoiding insurance is possible with 20% down, gifted funds, or creative structuring.
First-time buyers may still benefit from insured mortgages if it means buying sooner.
Refinancing, portability, and amortization rules all change with insured mortgages.
Your Path to Smarter Home Financing
What Is Mortgage Default Insurance?
Mortgage default insurance protects the lender (not you) if you fail to make payments. In Canada, it’s provided by three insurers: CMHC, Sagen, and Canada Guaranty.
Who Needs It?
- Down payment <20% → insurance is mandatory.
- Available on homes priced below $1.5 million (since December 15, 2024).
| Down Payment | Premium % | Example: $600,000 Mortgage |
|---|---|---|
| 5%–9.99% | 4.00% | $24,000 added |
| 10%–14.99% | 3.10% | $18,600 added |
| 15%–19.99% | 2.80% | $16,800 added |
| ≥20% | 0% | $0 |
Nick's Note
I worked with a Burnaby buyer who thought their down payment covered everything. Their $600k mortgage added nearly $24k in premiums. Once I showed them how reaching 10% down cut the premium by about $5k, they adjusted and saved big.
Also Read:How to Qualify for More (Without Stretching Too Far) →
How Premiums Are Collected
- Premiums are added (“capitalized”) onto the mortgage balance.
- They are not paid upfront in cash.
- Example: $600,000 mortgage + $18,600 premium = $618,600 total mortgage.
Impact on Monthly Payment (25-year amortization @ 5.25%):
- Without insurance: $3,576/month
- With insurance: $3,686/month (~$110 more)
👉 That extra $110 adds up to $33,300 over 25 years.
Nick's Note
One Surrey client saw their payment rise by $130/month due to premiums. By adding a small gift from family, they reached 20% down and eliminated the insurance entirely.
When an Insured Mortgage Still Makes Sense
While avoiding premiums is ideal, insured mortgages can have benefits:
- Lower interest rates compared to uninsured (banks face less risk).
- Enables buyers with smaller down payments to enter the market sooner.
- Can be portable if you move and transfer the mortgage.
Example: Vancouver Condo Buyer
- With 10% down: $540k mortgage + $16,700 premium = $556,700.
- Without insurance (20% down): $480k mortgage, but they’d need $120k cash upfront.
Nick's Note
A Vancouver teacher bought two years earlier with an insured mortgage at 10% down. Yes, they paid a $16k premium, but that condo appreciated by $80k in those two years — worth it.
Also Read:Should I Buy Now or Wait for Rates to Drop? →
How to Avoid Mortgage Insurance
- Reach 20% Down Payment - Combine savings, FHSA, HBP, and family gifts.
- Know the $1.5M line - Insurance isn’t available at $1.5 million or more, so you need 20% down. Below that, you can buy with less down and pay a premium.
- Use a Co-Borrower - Spreading income and down payment contributions can push you over 20%.
- Consider Alternatives - Some private lenders allow uninsured options with flexible structures.
BC-Specific Example:
- $950,000 townhouse in Surrey → requires $190k down to avoid insurance.
- At $925,000, they’d need $185k. With less than 20% down, the minimum at $925,000 is $67,500, plus an insurance premium.
Nick's Note
Before the limit rose to $1.5 million in December 2024, I had a Richmond buyer who negotiated their price to just under $1 million so they could buy with less than 20% down.
Also Read:First-Time Buyer Incentives in Canada →
Frequently Asked Questions
You Have Questions — We Have Answers!
Mortgage Insurance in Canada
Is CMHC the only provider?
No, lenders also use Sagen and Canada Guaranty.
Can I get a refund if I refinance?
Generally no. Refinancing doesn’t return any of the premium. If you move and port your mortgage, the insurer may credit part of the premium you already paid, and CMHC refunds 25% of the premium on qualifying energy-efficient homes (Eco Plus).
Is insurance tax-deductible?
No, premiums are not deductible in Canada.
Bottom Line
Mortgage insurance is a reality for many BC buyers. The key is knowing:
- When it’s required.
- How to minimize premiums.
- When it may actually help you buy sooner and build equity.
Quick Takeaways:
Insurance applies to down payments under 20% on homes priced below $1.5M.
Premiums = 2.8–4% of mortgage, added to balance.
Avoid with 20% down, gifted funds, or price structuring.
Insured mortgages can still make sense for earlier entry.
Your Path to Smarter Home Financing
Written by: Nick Atwal
Mortgage Broker at Coastal Blue Mortgages
BCFSA licence 504576
Top 5% of Dominion Lending Centres brokers in Canada, 2022Canadian Mortgage Professional Rising Star, 2023
Nick Atwal is a mortgage broker at Coastal Blue Mortgages, helping families and business owners with complex structuring and refinancing solutions. Recognized as one of Canada’s rising young mortgage professionals by Canadian Mortgage Professional, he focuses on thoughtful planning, clear communication, and long-term financial outcomes.
More about NickMortgage Insurance Basics
Mortgage insurance = lender protection, not borrower protection.
- Required with <20% down.
- Premiums range 2.8–4%.
- Three providers: CMHC, Sagen, Canada Guaranty.
Nick's Note
A Kelowna buyer was shocked to learn their insurance premium didn’t cover job loss or illness — it only protected the bank.
Frequently Asked Questions
Does mortgage insurance help me?
Indirectly — it allows lower down payment entry.
Can I choose my insurer?
No, lender decides.
Quick Takeaways:
Mandatory under 20% down.
Protects lender, not borrower.
Premium is added to your mortgage.
Mortgage Insurance Premiums Explained
Example: $500k Mortgage @ 10% Down
- Premium 3.10% = $15,500
- Total Mortgage = $515,500
Nick's Note
A Surrey couple’s premium bumped their loan high enough to trigger slightly higher payments. We modeled both insured and uninsured scenarios so they could decide.
Frequently Asked Questions
Can I pay upfront?
Rarely — most are added to mortgage.
Do premiums vary by insurer?
Slightly, but usually similar.
Quick Takeaways:
2.8–4% added.
Capitalized into loan.
Increases monthly cost.
Benefits of an Insured Mortgage
Insured mortgages are not always bad:
- Can unlock better rates.
- Allows entry sooner.
- Portable with some lenders.
Nick's Note
One Vancouver buyer entered the market 3 years earlier by accepting an insured mortgage. Their property appreciated faster than the premium cost.
Frequently Asked Questions
Can I port my insured mortgage?
Yes, often with same lender.
Is rate always lower?
Usually, but not guaranteed.
Quick Takeaways:
Faster entry into market.
Sometimes better rates.
Can be portable.
Ways to avoid:
- Reach 20% down.
- Use FHSA and HBP savings to reach 20%.
- Add co-borrower or gifted funds.
Example:
- A buyer at $1,520,000 has to bring $304,000 down (20%).
- By negotiating to $1,495,000, the minimum down payment drops to $124,500, with an insurance premium on top.
Nick's Note
A Richmond client negotiated their price to just under the limit for insured mortgages, so they could buy with less than 20% down.
Frequently Asked Questions
Does $1,499,999 still qualify?
Yes. Insurance is available on homes priced below $1.5 million.
Can I combine strategies?
Absolutely.
Quick Takeaways:
20% down = no premiums.
$1.5M = key threshold.
Negotiating price can save tens of thousands.
Try it with your numbers
A quick estimate at today's 5-year fixed rate, with mortgage insurance and Canadian semi-annual compounding built in.
Monthly payment, 25 years at 4.89%
$4,271
Includes $22,320 mortgage insurance (3.10%) added to the mortgage.