Understanding CMHC Mortgage Insurance

Mortgage default insurance protects the lender — not you — if you stop making payments. It's required by law on any mortgage with a down payment under 20% (a 'high-ratio' mortgage), and it's what allows lenders to offer those mortgages at all.

The premium is calculated as a percentage of your loan amount, and the percentage rises as your loan-to-value ratio rises — a 19% down payment pays a much smaller premium rate than a 5% down payment.

The premium can be paid upfront or, more commonly, added to your mortgage principal and amortized along with the rest of your loan. In several provinces, provincial sales tax on the premium itself is due upfront and can't be added to the mortgage.