Do You Need Mortgage Insurance? Calculate Your CMHC Premiums
Hi, WealthTrack founder David Pipe here. For many Canadians, buying a home without at least a 20% down payment can feel impossible. With rising home prices, saving that much cash is often out of reach for first-time buyers. Thankfully, there’s a system in place that helps Canadians enter the housing market sooner: mortgage insurance.
Also known as CMHC insurance or mortgage default insurance, this coverage protects lenders if a borrower defaults on their mortgage. In exchange, buyers can purchase a home with as little as 5% down. But this protection comes at a cost—an insurance premium added to your mortgage.
So, how much will it cost you? That’s where a CMHC mortgage insurance calculator comes in. With just a few inputs, you can estimate your premiums and see how they affect your total mortgage amount.
In this guide, we’ll explain what mortgage insurance is, who needs it, how premiums are calculated, and how to use a calculator to understand your costs.
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What Is Mortgage Insurance (CMHC Insurance)?
Mortgage insurance is designed to protect the lender in case you can’t make your mortgage payments—not the buyer. In Canada, it’s required for what’s known as a high-ratio mortgage: any mortgage where the down payment is less than 20% of the purchase price.
The insurance ensures lenders are willing to issue mortgages to buyers with smaller down payments, which ultimately helps more Canadians become homeowners.
Who Provides Mortgage Insurance in Canada?
In Canada, there are three main providers of mortgage default insurance:
CMHC (Canada Mortgage and Housing Corporation) – the most well-known, government-backed provider.
Sagen (formerly Genworth Canada) – a private insurer.
Canada Guaranty – another private insurer.
While all three providers exist, the term “CMHC insurance” has become a catch-all phrase for mortgage insurance in general. The premiums are typically the same, regardless of which provider your lender uses.
Who Needs Mortgage Insurance?
You’ll need mortgage insurance if:
Your down payment is less than 20% of the home’s purchase price.
The home you’re buying is under $1 million (mortgage insurance is not available for homes priced at $1 million or more).
The amortization period is 25 years or less (longer amortizations aren’t insurable).
If you put 20% or more down, your mortgage is considered conventional and you don’t need insurance.
How Are CMHC Premiums Calculated?
Premiums are based on the loan-to-value ratio (LTV)—the size of your mortgage compared to the purchase price of the home. The smaller your down payment, the higher the premium rate.
As of today, typical premium rates are:
5% down payment (95% LTV) → 4.00% of the mortgage amount
10% down payment (90% LTV) → 3.10% of the mortgage amount
15% down payment (85% LTV) → 2.80% of the mortgage amount
20% down payment (80% LTV) → No insurance required
Example: Calculating CMHC Premiums
Let’s say you’re buying a $500,000 home.
Down payment: 5% ($25,000)
Mortgage amount: $475,000
Premium rate: 4.00%
Premium: $19,000
Your total mortgage becomes $494,000 (mortgage + premium), which slightly increases your monthly payments.
If instead you had 10% down ($50,000), your premium would drop to 3.10%, or $13,950. That’s nearly $5,000 in savings just by increasing your down payment.
How Are Premiums Paid?
Most buyers don’t pay the mortgage insurance premium upfront. Instead, the premium is added directly to your mortgage balance and repaid over time as part of your monthly payments.
Using the above example:
Mortgage + premium = $494,000
At 5% interest over 25 years, your monthly payment is about $2,870.
Without insurance, the payment would be about $2,747.
The difference? $123 per month.
Over time, these small differences add up. That’s why a CMHC premium calculator is helpful—it shows you the exact numbers for your situation.
How a CMHC Premium Calculator Helps
Manually calculating premiums requires knowing the loan-to-value ratios and rates. A calculator does the work for you. You simply enter:
Purchase price of the home
Your down payment amount (or percentage)
Amortization period
Interest rate (optional, for monthly payment estimates)
The calculator then tells you:
Whether you need mortgage insurance
The exact premium amount
Your new total mortgage balance including the premium
The impact on your monthly payment
This helps you quickly compare scenarios—say, a 5% down payment vs. 10%—to decide if saving more upfront makes sense.
Advantages of Mortgage Insurance
Access to homeownership sooner – You don’t need to wait years to save a 20% down payment.
More flexibility for first-time buyers – Enter the market before prices rise further.
Lender confidence – Because the insurance protects the lender, you may qualify for competitive mortgage rates.
Downsides of Mortgage Insurance
Adds to your debt – Premiums are rolled into your mortgage balance.
Increases your monthly payments – Even small increases add up over decades.
No direct benefit to you – The insurance protects the lender, not the borrower.
Strategies to Reduce CMHC Premiums
Increase your down payment – Even moving from 5% to 10% down can save thousands.
Look for rebates – CMHC offers partial premium refunds for energy-efficient homes.
Compare home prices – A smaller mortgage means a smaller premium.
Plan for the long term – If waiting a year lets you save a larger down payment, it may be worth the delay.
Example: 5% vs. 10% Down Payment
Let’s compare side by side for the same $500,000 home.
Scenario A: 5% down ($25,000)
Mortgage: $475,000
Premium: $19,000
Total mortgage: $494,000
Monthly payment: ~$2,870
Scenario B: 10% down ($50,000)
Mortgage: $450,000
Premium: $13,950
Total mortgage: $463,950
Monthly payment: ~$2,697
By doubling your down payment, you save about $173 per month and reduce your total debt by $30,050.
The Bottom Line
Mortgage insurance is a fact of life for many Canadians who can’t save a 20% down payment. While it adds costs, it also makes homeownership more accessible by allowing buyers to enter the market sooner.
A CMHC premium calculator is the easiest way to see exactly how much insurance will add to your mortgage—and how different down payment levels change the numbers. With that knowledge, you can make a smart decision about when and how to buy.
If you’re planning to purchase with less than 20% down, don’t guess at the numbers. Run them through a calculator and see the impact for yourself—you may find that a slightly larger down payment saves you thousands in the long run.
