For many Canadians, mortgage insurance is a necessary step in the homebuying process—but it’s not always clear when it applies or how it impacts your overall costs. With the latest changes in Canadian mortgage rules allowing insured mortgages for homes up to $1.5 million, understanding how mortgage insurance works is more important than ever.
In this article, we’ll break down what mortgage insurance is, when it’s required, and how it affects your monthly payments. Whether you’re a first-time homebuyer or upgrading to a larger property, knowing the ins and outs of mortgage insurance can help you make more informed decisions.
If you’re ready to take the next step toward homeownership, Homewise can guide you through the mortgage process and help you find the best rates.
1. What Is Mortgage Insurance?
Mortgage insurance—also known as mortgage default insurance—protects lenders in case a borrower defaults on their mortgage. It allows buyers to secure a mortgage with a down payment of less than 20% by mitigating the lender’s risk.
For buyers, mortgage insurance makes homeownership more accessible, especially in competitive markets like Toronto, Vancouver, and Montreal, where property prices are high.
2. When Is Mortgage Insurance Required?
In Canada, mortgage insurance is mandatory if your down payment is less than 20% of the home’s purchase price. This applies to high-ratio mortgages.
However, thanks to new regulations in 2024, insured mortgages can now apply to homes priced up to $1.5 million—an increase from the previous $1 million cap.
Here’s a breakdown of when mortgage insurance is required:
Homes Priced Up to $1.5 Million (High-Ratio Mortgages)
- 5% down on the first $500,000.
- 10% down on the portion between $500,000 and $1.5 million.
Example:
For a $1.2 million home:
- 5% of $500,000 = $25,000
- 10% of $700,000 = $70,000
- Total Minimum Down Payment = $95,000
If the buyer cannot put down 20%, mortgage insurance will be required.
Homes Priced Over $1.5 Million (Uninsured Mortgages)
For homes over $1.5 million, mortgage insurance is not available. Buyers must provide a minimum 20% down payment, which classifies these as uninsured mortgages.
Pro Tip: Looking at homes over $1.5 million? Use our mortgage pre-approval tool to explore options for uninsured mortgages.
3. How Much Does Mortgage Insurance Cost?
Mortgage insurance isn’t a one-size-fits-all expense. The cost depends on the size of your mortgage and your down payment.
Mortgage insurance is calculated as a percentage of the loan amount and ranges between 2.8% and 4.0%. The lower your down payment, the higher the percentage applied.
Mortgage Insurance Premium Breakdown:
Down Payment | Mortgage Insurance Premium (as % of loan) |
| 5% to 9.99% | 4.00% |
| 10% to 14.99% | 3.10% |
| 15% to 19.99% | 2.80% |
Example:
If you purchase a $700,000 home with a 10% down payment:
- Mortgage Amount: $630,000 (after $70,000 down)
- Insurance Premium: 3.1% of $630,000 = $19,530
This premium can be added to your mortgage and paid off over time.
4. How Does Mortgage Insurance Affect Your Monthly Payments?
Mortgage insurance increases the overall loan amount, which means slightly higher monthly payments. However, it allows you to purchase a home sooner without waiting to save a full 20% down payment.
Here’s an example based on a 5-year fixed-rate mortgage at 5.5% interest:
Home Price | Down Payment | Loan Amount (w/ Insurance) | Monthly Payment |
| $700,000 | 10% | $649,530 | $3,998 |
| $700,000 | 20% | $560,000 | $3,448 |
While the insured mortgage leads to a higher payment, the difference allows buyers to enter the market faster.
5. Benefits of Mortgage Insurance
Despite adding to your mortgage balance, mortgage insurance provides several key advantages:
- Lower Barrier to Entry – Buyers can enter the market with as little as 5% down.
- Competitive Rates – Insured mortgages often come with lower interest rates since lenders view them as lower-risk.
- Homeownership Sooner – You don’t need to wait years to save for a 20% down payment, allowing you to benefit from market appreciation.
6. Can You Avoid Mortgage Insurance?
The easiest way to avoid mortgage insurance is by putting down 20% or more at the time of purchase. This eliminates the need for CMHC or private mortgage insurance, resulting in lower monthly payments.
Other ways to reduce or avoid mortgage insurance:
- Gifted Down Payment – Some lenders allow gifted funds from family to boost your down payment.
- Buy Below $1.5 Million – Homes over $1.5 million require at least 20% down, eliminating the insurance requirement by default.
Thinking about your options? Explore our mortgage options to see how you can avoid or reduce mortgage insurance costs.
7. How to Apply for an Insured Mortgage
The mortgage insurance process is handled through your lender during the application process. Homewise works with over 30 lenders across Canada to help you find the best mortgage options—whether insured or uninsured.
Get started today by applying for pre-approval with Homewise in just 5 minutes.
8. The Future of Mortgage Insurance in Canada
As housing prices continue to rise, the expansion of insured mortgages up to $1.5 million is expected to help more Canadians access homeownership. This change reflects the realities of the current market, making it easier for buyers in larger urban centers to secure financing.
Conclusion
Mortgage insurance plays a vital role in making homeownership possible for many Canadians. While it adds to your overall mortgage balance, it provides a path to owning a home with a smaller upfront investment. Understanding when mortgage insurance applies—and how to reduce its costs—can help you make informed decisions on your journey to homeownership.
Ready to start? Apply for a mortgage with Homewise and let us guide you through every step of the process.
