When you're buying a home in Canada with less than 20% down, there's an additional cost that comes into play: mortgage default insurance. Most people call it "CMHC insurance" — named for the Canada Mortgage and Housing Corporation, the Crown corporation that is the most prominent provider — and it's one of the most commonly misunderstood costs in home buying.
This guide breaks it down clearly and completely, so you know exactly what you're paying, why it exists, how it's calculated, and whether it changes the math on your purchase decision.
What Is Mortgage Default Insurance and Why Does It Exist?
Mortgage default insurance is protection for the lender, not the borrower. If you buy a home with a small down payment and then default on the mortgage, the insurance pays out to the lender. This protection allows Canadian lenders to offer insured mortgages at lower interest rates than they otherwise could — because the risk of borrower default is effectively transferred to the insurer.
The system was designed to allow Canadians with smaller savings to enter the housing market without lenders needing to charge premiums for the increased risk of high-ratio lending. In practical terms, it means that buyers with as little as 5% down can often access mortgage rates that are competitive with — or even better than — rates available to buyers putting 20% or more down.
The trade-off is that the borrower pays the insurance premium. That premium is added to the mortgage balance, which means you pay interest on it over the life of the loan — though you don't need to produce the premium as cash at closing.
When Is Mortgage Default Insurance Required?
In Canada, mortgage default insurance is mandatory when your down payment is less than 20% of the purchase price. It applies to owner-occupied properties with a purchase price below $1.5 million. Key rules to know:
- Minimum down payment is 5% on homes up to $500,000
- On homes priced between $500,000 and $999,999, you need 5% on the first $500,000 and 10% on the remainder
- Homes priced at $1.5 million or more are not eligible for insured mortgages — 20% minimum is required
- The property must be owner-occupied (investment properties require conventional financing)
- Maximum amortization on insured mortgages is 30 years
Given that the average home price in Regina sits around $368,000, the vast majority of purchases in this city fall comfortably within the insured mortgage threshold — making this topic directly relevant to most first-time buyers here.
The Premium Rates
Premiums are calculated as a percentage of the total mortgage amount (purchase price minus your down payment). The rate depends on your loan-to-value (LTV) ratio — in other words, how much you're borrowing relative to the purchase price.
| Down Payment | Loan-to-Value | Premium Rate |
|---|---|---|
| 5.00% – 9.99% | 90.01% – 95% | 4.00% |
| 10.00% – 14.99% | 85.01% – 90% | 3.10% |
| 15.00% – 19.99% | 80.01% – 85% | 2.80% |
The premium decreases as your down payment increases — so there can be real value in stretching to the 10% or 15% threshold if you're close to those boundaries.
What Does This Look Like on a Real Regina Home?
Let's run through a concrete example using a $368,000 home — the Regina average — with different down payment scenarios.
Scenario 1: 5% Down ($18,400)
Mortgage amount: $349,600. Premium rate: 4.00%. Insurance premium: $13,984. This premium is added to the mortgage, bringing the insured mortgage balance to $363,584. Your monthly payment on this amount at a 5-year fixed rate of approximately 4.5% over 25 years would be roughly $1,985/month.
Scenario 2: 10% Down ($36,800)
Mortgage amount: $331,200. Premium rate: 3.10%. Insurance premium: $10,267. Insured mortgage balance: $341,467. At the same rate and amortization, monthly payments would be approximately $1,865/month — about $120 less per month than the 5% scenario, and you've reduced your total insurance cost by nearly $3,700.
Scenario 3: 15% Down ($55,200)
Mortgage amount: $312,800. Premium rate: 2.80%. Insurance premium: $8,758. Insured mortgage balance: $321,558. Monthly payments drop further to approximately $1,756/month.
The Sweet Spot: Approaching 20%
If you can get to a 20% down payment ($73,600 on a $368,000 home), you eliminate the CMHC premium entirely. That saves you $8,758 in the 15% scenario — but requires $18,400 more cash upfront. Whether that trade-off makes sense depends on your liquidity, your rate, and what you'd do with that $18,400 otherwise. There's no universally right answer; it's a calculation worth doing with your mortgage professional.
PST on CMHC in Saskatchewan: The Cost Most Buyers Miss
Here is a cost that catches many Saskatchewan buyers off guard: provincial sales tax applies to CMHC insurance premiums in this province. Saskatchewan charges 9% PST on the premium amount — and unlike the premium itself, the PST cannot be added to the mortgage. It must be paid in cash at closing.
Using the 5% down scenario above: PST on a $13,984 premium is $1,258.56. That cash is due on possession day in addition to your down payment and other closing costs. Make sure your lawyer and mortgage broker factor this into your closing cost estimate — it often comes as a surprise to first-time buyers who didn't know it existed.
The other provinces that charge PST on mortgage insurance premiums are Ontario and Quebec. All other provinces exempt it.
How the Premium Is Added to Your Mortgage
The premium itself does not come out of your pocket at closing. It is added to your mortgage balance and amortized over the life of the loan. Your lender and insurer handle this automatically — the premium is factored into your mortgage approval and the resulting balance is what your monthly payments are based on.
This is worth understanding clearly: you will be paying interest on your insurance premium for the full amortization period. On a 25-year mortgage at 4.5%, the total interest cost on that $13,984 premium works out to roughly $8,500 over the life of the loan. That brings the true all-in cost of the insurance considerably higher than the face value of the premium. It's not a reason not to buy with less than 20% down — but it's worth understanding as part of the complete financial picture.
CMHC vs. Sagen vs. Canada Guaranty
CMHC is the best-known mortgage default insurer, but it isn't the only one. Two private insurers — Sagen (formerly Genworth Canada) and Canada Guaranty — offer the same product under very similar terms and rates. Your lender will typically direct your mortgage to whichever insurer they work with, and from a borrower's perspective the products are functionally equivalent. The premium rates, eligibility requirements, and basic structure are the same across all three.
Some lenders work exclusively with one insurer; others offer access to all three. This is rarely a decision you need to make yourself — but it's worth knowing that CMHC doesn't have a monopoly on this product.
Should You Try to Avoid Mortgage Default Insurance?
The instinctive answer is yes — who wants to pay an extra $10,000–$14,000? But the question deserves more nuance than that. Here are the arguments on both sides.
Reasons to Avoid It If You Can
- Saving to 20% eliminates the premium and reduces your total mortgage cost
- A larger down payment means less interest paid over the life of the loan
- Conventional (uninsured) mortgages give you more flexibility on amortization — up to 30 years without the insured cap
Reasons Not to Wait
- While you save, home prices may be rising — costing you more than the insurance premium you're trying to avoid
- Insured mortgages often come with better interest rates, partially offsetting the premium cost
- Getting into the market earlier means building equity sooner and benefiting from any future appreciation
- Keeping more savings liquid gives you a buffer for unexpected expenses after purchase
Do the Math for Your Specific Situation
There is no universal right answer on whether to wait for 20% down. In a rising market, every month of waiting can cost more than the insurance premium itself. In a flat or declining market, waiting might save money. Run the numbers with a mortgage professional — they can model both scenarios in your specific situation and give you clear guidance on which path makes more financial sense given current conditions.
Tips to Reduce or Eliminate CMHC Costs
- Use the First Home Savings Account (FHSA): The federal FHSA allows first-time buyers to contribute up to $8,000/year tax-free toward a home purchase — accelerating your path to a larger down payment
- Use your RRSP Home Buyers' Plan: First-time buyers can withdraw up to $35,000 per person ($70,000 per couple) from RRSPs to use as a down payment with no immediate tax consequence
- Consider a gift letter: If family members can contribute to your down payment, a properly documented gift can push you into a lower premium tier or past the 20% threshold entirely
- Price your purchase strategically: If you're just under a down payment threshold, a slightly less expensive home may mean a lower premium — or elimination of it altogether
CMHC insurance is not an obstacle to homeownership — it's actually what makes homeownership accessible for most first-time buyers in Canada. Understanding it clearly means you can factor it correctly into your budget, avoid surprises at closing, and make the down payment decision with full information rather than guesswork.