What Is CMHC Mortgage Default Insurance?
Mandatory insurance required when your down payment is less than 20%, protecting the lender if you default. Provided by CMHC, Sagen, or Canada Guaranty.
Definition
CMHC mortgage default insurance is mandatory for high-ratio mortgages in Canada, meaning any purchase where the down payment is less than 20% of the home's price. The Canada Mortgage and Housing Corporation (CMHC), along with private insurers Sagen and Canada Guaranty, administers these policies. The premium is a percentage of the loan amount: 4.00% for a loan-to-value (LTV) above 90%, 3.10% for LTV of 85.01% to 90%, and 2.80% for LTV of 80.01% to 85%. The premium is typically added to your mortgage and amortised over the loan term. Homes priced at $1 million or more are not eligible for CMHC insurance, meaning a minimum 20% down payment is required.
Formula
Example
You buy a $600,000 home with 10% down ($60,000). Loan = $540,000, LTV = 90%. CMHC premium = 3.10% x $540,000 = $16,740. This is added to your mortgage, making total loan = $556,740.