CMHC default insurance premium.
CMHC premium
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LTV
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Total mortgage (loan + premium)
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Insurance that protects the lender, paid by you
When you buy a home in Canada with less than 20 percent down, the law requires mortgage default insurance. It is worth being clear about what this insurance does: it protects the lender, not you, against the risk that you stop paying and the home sells for less than the outstanding loan. You pay the premium, but the bank is the beneficiary. In exchange, lenders accept a much smaller down payment than they otherwise would, which is the whole reason high-ratio buyers can get into the market at all. The insurer is usually CMHC, the federal Crown corporation, or one of two private insurers, Sagen and Canada Guaranty.
The premium is a percentage of the loan amount, and the percentage rises as your down payment shrinks, because a smaller down payment means more risk for the insurer. This tool works out your loan-to-value ratio, picks the matching premium tier, and shows both the premium and the total mortgage once the premium is rolled in. The tiers it uses run from 2.40 percent at the lowest-risk high-ratio band up to 4.00 percent for the smallest down payments.
Loan-to-value is the number that sets your rate
Loan-to-value, or LTV, is the loan divided by the purchase price. This tool sets the rate by LTV band: above 95 percent the premium is 4.00 percent, the band above 90 percent up to 95 percent carries 3.10 percent, the band above 85 percent up to 90 percent carries 2.80 percent, and the band above 80 percent up to 85 percent carries 2.40 percent. The jumps between bands are large, so nudging your down payment up enough to land in a lower band can cut the premium sharply, sometimes by more than the extra cash you put in.
A $600,000 home with $60,000 down
Take the default: a $600,000 property with a $60,000 down payment. That leaves a $540,000 loan and a 90 percent loan-to-value ratio, since $60,000 is exactly 10 percent of the price. A 90 percent LTV falls into the 2.80 percent premium tier in this tool, giving a premium of $15,120. That premium is added to the loan, so the total mortgage you actually carry is $555,120.
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That $15,120 is rarely paid in cash. It is added to the principal and amortized over the life of the mortgage, so you pay interest on it for years, which makes the true cost higher than the sticker figure. There is also provincial sales tax on the premium in Ontario, Quebec and Saskatchewan, and unlike the premium itself, that tax must be paid up front at closing rather than rolled into the loan.
When you can avoid it, and when you cannot insure at all
The clean way to skip the premium is a down payment of 20 percent or more, which takes you out of high-ratio territory. Price ceilings also change the rules. As of recent changes the high-ratio ceiling rose to $1.5 million, with a tiered minimum down payment between $500,000 and $1.5 million. Above that ceiling no insurer will cover the mortgage, so you must put down at least 20 percent regardless of how strong your finances are.
This calculator is for first-time buyers sizing the real cost of a low down payment, anyone weighing whether to scrape together more cash to cross 20 percent, and buyers near the $1.5 million ceiling. A practical tip: run the numbers at your current down payment and at the next band up, because the premium is a percentage of the whole loan and moving into a lower band can save several thousand dollars. The common mistake is forgetting the premium is amortized, so people underestimate how much interest it quietly adds over a 25-year term.
Is the CMHC premium refundable if I sell early?
No, the premium is not refunded if you sell or pay off the mortgage early. It is a one-time charge for the coverage, fully earned once the mortgage is advanced. There is, however, a portability feature: if you move and take a new insured mortgage, you may be able to apply a portion of the original premium against the new one, which avoids paying twice. Ask your lender about premium portability before you discharge an insured mortgage, because it can save a meaningful amount on the next purchase.
Does a bigger down payment always beat paying the premium?
Not always, and this is a genuine judgment call. A larger down payment cuts or eliminates the premium and reduces interest, but it also ties up cash you might need for renovations, an emergency fund, or higher-return investments. For many buyers, getting into the market sooner with a high-ratio insured mortgage is worth the premium, especially if home prices are rising faster than they could save. Run your own numbers: the premium is a known cost, while the opportunity cost of a bigger down payment depends on what else you would do with the money.