Quick answer: Mortgage default insurance is required when you put less than 20% down. It protects the lender, not you, if you stop paying. The premium is 2.80% to 4.00% of your mortgage, depending on your down payment, and it’s added to the loan. In Ontario you also pay 8% provincial sales tax on the premium in cash at closing. On a $600,000 Ottawa home with the minimum down payment, that’s a $22,600 premium plus $1,808 of tax. In return, insured mortgages usually get lower rates.
Most first-time buyers pay for it without ever seeing a bill, because the premium is folded into the mortgage. That’s exactly why it’s worth understanding what it costs and what you get for it.
What is mortgage default insurance?
It’s insurance the lender requires on any mortgage above 80% of the home’s value. If the borrower defaults, the insurer covers the lender’s loss. In Canada it comes from three insurers: CMHC, Sagen and Canada Guaranty. Your lender arranges it; you don’t shop for it yourself.
It doesn’t protect you. It isn’t life or disability insurance, and it won’t make your payments if you lose your job. What it does is let lenders offer mortgages with as little as 5% down, usually at lower rates than an uninsured mortgage, because the insurer carries the default risk.
How much does mortgage default insurance cost?
The premium is a one-time percentage of the mortgage, based on your loan-to-value ratio (CMHC):
| Down payment | Loan-to-value | Premium (% of the mortgage) |
|---|---|---|
| 5% to 9.99% | 90.01% to 95% | 4.00% |
| 10% to 14.99% | 85.01% to 90% | 3.10% |
| 15% to 19.99% | 80.01% to 85% | 2.80% |
| 20% or more | 80% or less | Not required |
The premium can be added to your mortgage. In Ontario, provincial sales tax applies to the premium, and CMHC says that tax can’t be added to the loan. Ontario’s retail sales tax on insurance premiums is 8% (Ontario Ministry of Finance), so plan to pay it in cash on closing day, alongside your land transfer tax and legal fees.
What does it cost on a $600,000 Ottawa home?
Here’s an example at four down payments. $600,000 is an example price, not a market figure. Payments use the best 5-year fixed rates we tracked as of September 30, 2026: 4.54% insured and 4.94% uninsured, over 25 years.
| Down payment | Premium (added to the loan) | Ontario sales tax (cash) | Total mortgage | Rate | Monthly payment |
|---|---|---|---|---|---|
| $35,000 (5.8%, the minimum) | $22,600 (4.00%) | $1,808 | $587,600 | 4.54% | $3,265 |
| $60,000 (10%) | $16,740 (3.10%) | $1,339 | $556,740 | 4.54% | $3,094 |
| $90,000 (15%) | $14,280 (2.80%) | $1,142 | $524,280 | 4.54% | $2,913 |
| $120,000 (20%) | None | None | $480,000 | 4.94% | $2,775 |
Two things stand out. First, because the premium is borrowed, you pay interest on it too. At 4.54%, the $22,600 premium would cost about $37,700 by the time it’s paid off over 25 years, if rates stayed the same. Second, the jump from 5.8% down to 10% down saves $5,860 of premium. Each step down in the table is worth knowing about if you’re close to a threshold.
What the table doesn’t show is time. Saving the extra $85,000 to get from the minimum to 20% down can take years. For many buyers the premium is the price of buying now instead of later. We compare the two in more detail in 5% down vs 20% down for Ottawa first-time buyers.
Do you ever get the premium back?
No. It’s a one-time charge, and it isn’t refunded if you sell or pay the mortgage off early. If you move and port your mortgage to a new home, and you need to borrow more, CMHC charges a premium on the increase, at a different rate from the table above. Ask about that before you assume a port will be cheap.
When doesn’t this apply?
With 20% or more down, insurance isn’t required, although some lenders insure low-ratio mortgages at their own cost behind the scenes; that doesn’t cost you anything. Homes priced at $1.5 million or more can’t be insured, so the minimum down payment is 20%. If your down payment comes from a non-traditional source, such as borrowed funds, the premium at 5% down is 4.50% rather than 4.00%. And rental properties you won’t live in have their own rules.
Common questions about mortgage default insurance
Who pays for mortgage default insurance?
You do, even though it protects the lender. The premium is usually added to your mortgage, and in Ontario the provincial sales tax on it is paid in cash at closing.
Is CMHC insurance the same as mortgage default insurance?
CMHC is one of three insurers. Sagen and Canada Guaranty are the other two. Your lender chooses which one to use, and the premiums are set out in each insurer’s schedule.
Can I avoid mortgage default insurance?
Only by putting 20% or more down. Below 20%, it’s required by law for federally regulated lenders.
Does mortgage default insurance cover me if I lose my job?
No. It protects the lender. Coverage for your payments if you’re sick, injured or out of work is a different product, usually called mortgage life or disability insurance, and it’s optional.
Is the sales tax on the premium added to my mortgage?
No. In Ontario the 8% provincial sales tax on the premium has to be paid in cash on closing day.
What should you do next?
If you’re deciding how much to put down, let me run the premium, the sales tax and the payment at each level for the home you’re looking at. Sometimes a few thousand dollars more down saves more than it costs. Book a 20-minute call with Joshua Tagg.
This is commentary, not advice. Rates and figures as of October 13, 2026. Rates are the best tracked 5-year fixed rates as of September 30, 2026; the home price is an example. Premiums are set by the insurers and can change. All mortgages are subject to lender and insurer approval. Joshua Tagg, Indi Mortgage.
