What Is Default Insurance?
Why it exists, who provides it in Canada, and what it means for you.
The quick version
If you put less than 20% down, your mortgage must have default insurance.
It protects the lender, not you, if a mortgage is not paid back.
It is what makes it possible to buy a home with as little as 5% down.
You pay for it with a one-time premium, usually added to your mortgage.
Canada has three default insurers: CMHC, Sagen and Canada Guaranty.
Want to know what this looks like for you? Book a call and I will walk you through your down payment options and what your premium would be.
What is default insurance?
Mortgage default insurance (you may also hear "mortgage loan insurance" or "CMHC insurance") protects the lender if a borrower stops making payments. Because the lender's risk is covered, lenders can offer mortgages to buyers with smaller down payments.
A mortgage with less than 20% down is called a high-ratio or insured mortgage. A mortgage with 20% or more down is called conventional.
It is not the same as mortgage life insurance
This one confuses a lot of people, so it is worth saying clearly:
Default insurance protects the lender. It is required with less than 20% down.
Mortgage life and disability insurance protects you and your family if something happens to you. It is optional, and it is a separate conversation.
Who are the three default insurers?
1. CMHC (Canada Mortgage and Housing Corporation)
A federal Crown corporation, owned by the Government of Canada
The largest and best-known insurer, which is why many people call all default insurance "CMHC insurance"
Its insurance is fully backed by the Government of Canada
Beyond insurance, CMHC also does housing research and runs national housing programs
2. Sagen
A private Canadian company, formerly known as Genworth Canada
The largest private mortgage insurer in Canada
Backed by a Government of Canada guarantee (90%) in the unlikely event the company could not pay its claims
3. Canada Guaranty
A private Canadian company, the newest of the three
Also backed by the 90% Government of Canada guarantee
What is their role?
All three do the same core job:
Review and approve insured mortgage applications, alongside the lender
Set their own guidelines within the federal rules (credit, income, property type and more)
Protect the lender if a mortgage goes into default
Keep the system stable, so Canadians with smaller down payments can still buy a home
Does it matter which one I get? Usually you do not choose: your lender works with its preferred insurer. Premiums are generally very similar, but each insurer has its own guidelines. That is where an experienced broker helps. If one insurer's guidelines do not fit your situation, another one might.
The rules for insured mortgages
Purchase price: must be under $1.5 million
Minimum down payment: 5% of the first $500,000, plus 10% of the portion between $500,000 and $1.5 million
Amortization: up to 25 years, or up to 30 years for first-time buyers and buyers of newly built homes
Debt ratios: GDS up to 39% and TDS up to 44%, and there are generally no exceptions (see our article GDS & TDS, Explained Simply)
The home: must be owner-occupied, or a 1 to 4 unit property with one unit you live in
How much does it cost?
The premium is a percentage of your mortgage amount. The less you put down, the higher the percentage. Here are CMHC's premiums for a purchase:
5% to 9.99% down: 4.00%
10% to 14.99% down: 3.10%
15% to 19.99% down: 2.80%
Choosing a 30-year amortization adds a small surcharge (0.20%). Premiums can change, so I will always confirm the current numbers for your purchase.
Good to know in Saskatchewan: Saskatchewan charges PST (6%) on the premium. The premium itself can be added to your mortgage, but the PST cannot. It is paid at closing, usually through your lawyer, so plan for it in your closing costs.
Let us see it in real life
Your situation: a $400,000 home with 5% down ($20,000).
Step 1: Your mortgage
$400,000 − $20,000 = $380,000
Step 2: Your premium
$380,000 × 4.00% = $15,200, added to your mortgage
New mortgage amount: $395,200
Step 3: The PST
$15,200 × 6% = $912, paid at closing
Is it worth it?
For many buyers, yes. Saving 20% can take years, while home prices and rent keep moving. Default insurance can get you into a home sooner, and insured mortgages are often offered some of the most competitive pricing because the lender's risk is lower.
That said, the right down payment depends on your whole picture. Sometimes putting a little less down and using the rest to pay off debt makes more sense. Sometimes waiting a few months to reach the next tier saves you thousands.
Do not do this alone
Insurers, lenders and guidelines all work together behind the scenes, and I navigate them every day. I will help you choose the down payment and mortgage structure that fit your goals, and I will make sure there are no surprises at closing.
Let us build your plan together. Book a call and we can start your pre-approval right away.
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