Hustle & GritWatch us on YouTube
Mortgage default insurance (also called mortgage loan insurance) protects the lender — not the borrower — if a high-ratio borrower defaults, and it is mandatory whenever the down payment is less than 20% of the purchase price. In Canada it is sold by three approved insurers — CMHC, Sagen, and Canada Guaranty — and the premium is typically added to the mortgage principal.
Default insurance exists because a lender advancing more than 80% of a property’s value is taking on more risk than a conventional loan. The insurer — CMHC, Sagen, or Canada Guaranty — reimburses the lender if the borrower defaults and the sale of the home doesn’t cover the outstanding balance. That’s why it is required on every high-ratio mortgage, and why the premium, though paid by the borrower, is priced and administered around the lender’s risk, not the borrower’s.
Eligibility for default-insured financing comes with federal limits: an insured (high-ratio) purchase price is capped at $1.5 million, the standard maximum amortization is 25 years (extended to 30 years for first-time buyers and buyers of new builds), and the file must meet the insured GDS/TDS maximums of 39%/44%. A mortgage that doesn’t fit those limits — even at a high loan-to-value ratio — can’t be default-insured and needs a different financing path.
Premium = Loan amount × Premium rate (set by LTV band)
Three approved insurers: CMHC, Sagen, and Canada Guaranty all apply the same federal insured-mortgage rules, so the borrower experience is nearly identical no matter which one insures the file.
Premium scales with LTV: published premiums run roughly 0.60%–4.00% of the loan amount depending on loan-to-value, with a surcharge for eligible 30-year insured amortizations.
Price and amortization caps: insured purchase price is capped at $1.5 million (effective December 15, 2024); standard insured amortization tops out at 25 years, or 30 years for first-time buyers and new builds.
Stress-tested like any other file: insured mortgages must still meet the max 39% GDS / 44% TDS limits, calculated at the minimum qualifying rate under OSFI Guideline B-20.
A buyer purchases a home for $500,000 with the minimum 5% down payment:
$475,000 × 4.00% = $19,000. The premium is typically added to principal, so the total insured mortgage becomes $475,000 + $19,000 = $494,000.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
Every term a Canadian mortgage professional needs — defined, sourced, and kept current.
See how Treadstone can scale your brokerage — a free call, no commitment.