Short answer: In Canada, a mortgage with less than 20% down usually requires mortgage default insurance. The policy protects the lender—not you—from losses if the borrower defaults. You get access to a smaller down payment, but you pay an insurance premium (often added to the loan) and interest on that premium. With 20% or more down, the mortgage is generally uninsured, but you still must meet the lender’s income, credit, property and stress-test requirements.
Neither option is automatically cheaper. Compare the cash you can keep, the premium and tax, the interest rate, amortization, qualification rules and how long you expect to hold the mortgage. The right choice depends on your numbers and time horizon.
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What “insured” and “uninsured” mean
Insured means the lender has default insurance
When your down payment is below 20% of the purchase price, the lender will normally require mortgage loan insurance if the mortgage and property meet an insurer’s rules. The insurance covers the lender’s eligible loss after a borrower defaults; it does not make your payments, protect your home equity or forgive your debt.
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Random freezes, missing sound and display glitches usually trace back to one bad driver. Find and replace yours safely.Free scan · under a minuteThe premium is based mainly on loan-to-value (LTV)—the mortgage balance compared with the property value. You can pay it from your own funds at closing or add it to the mortgage. Adding it preserves cash but increases the principal on which you pay interest.
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The Financial Consumer Agency of Canada (FCAC) describes mortgage-insurance premiums of approximately 0.6% to 4.5% of the mortgage amount. The exact amount depends on the insurer’s schedule, LTV, the source of the down payment, amortization and other loan details.
Uninsured means no default-insurance premium is required
A mortgage is generally uninsured when you have at least 20% equity at origination, although a lender can require insurance or other risk controls in particular circumstances. Uninsured borrowers do not bypass underwriting. Federally regulated lenders still assess income, credit, debts, property value, debt-service ratios and the mortgage stress test.
How much down payment is required?
For homes that qualify for an insured mortgage, FCAC’s current guide sets these broad minimums:
| Purchase price | Minimum down payment | What it means |
|---|---|---|
| $500,000 or less | 5% of the price | A qualifying $400,000 purchase could require $20,000 down. |
| More than $500,000 but below the applicable insured-price ceiling | 5% of the first $500,000, plus 10% of the portion above $500,000 | For example, a $700,000 purchase would require at least $25,000 on the first $500,000 and $20,000 on the remaining $200,000, or $45,000 total. |
| $1.5 million or more | 20% under FCAC’s consumer guidance | Confirm the exact boundary with the lender and insurer before relying on this rule. |
The federal government raised the insured-mortgage price cap to $1.5 million effective December 15, 2024. The Department of Finance announcement is at Canada.ca. CMHC’s 2025 fact sheet and FCAC’s consumer page use slightly different wording at the exact $1.5-million boundary, so a property priced precisely at that amount should be checked directly with the lender or insurer rather than assumed eligible.
What counts toward the down payment
Your lender will verify the source of the funds. Savings, a non-repayable gift from an immediate family member, proceeds from another property and certain registered-plan withdrawals may be acceptable, subject to documentation and program rules. Borrowed funds can change the debt-service calculation and may result in a different premium category. Ask for a written calculation showing the accepted source, required closing funds and resulting LTV.
Mortgage-insurance premiums and how they are charged
CMHC’s current homeowner premium schedule, accessed October 13, 2026, lists these rates on the total loan amount:
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| LTV band | CMHC premium |
|---|---|
| Up to 65% | 0.60% |
| 65.01%–75% | 1.70% |
| 75.01%–80% | 2.40% |
| 80.01%–85% | 2.80% |
| 85.01%–90% | 3.10% |
| 90.01%–95% | 4.00% |
| 90.01%–95% with a non-traditional down payment | 4.50% |
These are CMHC terms, not a promise that every insurer uses identical pricing or underwriting. CMHC also lists a 0.20-percentage-point surcharge when amortization exceeds 25 years. Review the current CMHC premium schedule for the applicable product.
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Example of adding the premium to the mortgage
Suppose the base mortgage is $380,000 and the applicable premium is 4.00%. The premium is $15,200, making the financed balance $395,200 before any other adjustments. You then pay interest and principal on $395,200, not $380,000. The example is illustrative; the lender’s calculation controls.
Sales tax on the premium
FCAC says provincial sales tax on the insurance premium applies in Ontario, Manitoba and Quebec and must be paid upfront. It cannot be added to the insured mortgage. Budget for that tax in addition to your down payment, legal costs, appraisal, land-transfer costs and other closing expenses. The applicable rate and treatment depend on the province and transaction date.
Eligibility rules beyond the down payment
Insurance is available only when both the borrower and property meet the insurer’s criteria. CMHC’s 2025 purchase fact sheet lists these owner-occupied limits:
- Up to 95% LTV for one- or two-unit homes.
- Up to 90% LTV for three- or four-unit homes.
- The maximum purchase price or lending value is below $1 million when LTV is 80% or less, or below $1.5 million when LTV is above 80%, subject to the program’s wording and the boundary caveat described above.
- Property condition, marketability, borrower income, credit history and debt-service requirements must also be acceptable.
Read the CMHC Purchase fact sheet for the product’s stated conditions. Approval by an insurer does not compel a lender to advance the mortgage; the lender makes the final credit decision.
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Yes, but not for every borrower. CMHC Home Start permits an insured amortization longer than 25 years—up to 30 years—for an eligible first-time homebuyer or a purchaser of a newly built home when LTV is above 80%. If neither condition applies, the listed maximum for an insured purchase mortgage is generally 25 years.
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A 30-year amortization lowers the required payment compared with a 25-year schedule at the same rate and balance. It also keeps the debt outstanding for longer and normally increases total interest. A longer amortization can trigger CMHC’s 0.20-percentage-point premium surcharge, so compare the premium, payment and interest together rather than focusing only on monthly affordability.
Eligibility definitions, property requirements and insurer approval still apply. Ask the lender to show both amortizations using the same rate, payment frequency and premium treatment.
How the mortgage stress test applies
At federally regulated lenders, the qualifying rate for both insured and uninsured mortgages is generally the higher of 5.25% or your contract rate plus two percentage points. For a 4.49% contract rate, the qualifying rate would be 6.49%; for a 3.00% contract rate, it would be 5.25%. The test uses the qualifying payment to calculate debt-service ratios, not the payment you initially expect to make.
FCAC explains the test in its mortgage-preparation guidance. Insured status does not remove the test, and having 20% down does not remove it. A lender may apply additional policies, and the actual decision remains with the lender and insurer.
What the stress test can change
- The maximum mortgage you qualify for.
- Whether a lender accepts a particular income type, bonus or self-employment history.
- How much other debt you can carry while remaining within the lender’s debt-service limits.
- Whether a longer amortization solves a payment problem or merely increases total borrowing cost.
Costs: a side-by-side way to compare the options
Use the same assumptions for each scenario. Record at least the following:
| Item | Insured mortgage | Uninsured mortgage |
|---|---|---|
| Upfront cash | Usually a smaller down payment, plus closing costs and any provincial tax on the premium. | Usually at least 20% down, plus closing costs; no default-insurance premium is normally required. |
| Starting principal | Base loan plus any financed insurance premium. | Loan amount without that premium. |
| Interest rate | May be different from an uninsured rate; no universal discount applies to every borrower. | Set by lender, borrower risk, property and market conditions. |
| Amortization | Generally up to 25 years, with 30 years available under the eligible first-time-buyer or new-build rules. | Subject to lender and regulatory policies; a longer schedule can increase total interest. |
| Qualification | Insurer and lender underwriting plus the stress test at federally regulated lenders. | Lender underwriting plus the same general stress test, subject to the narrow renewal exception below. |
| Holding-period cost | Interest on the financed premium, premium tax where applicable, payments and any rate changes at renewal. | Interest and payments on the larger down-payment alternative, with no insurance premium. |
| Renewal or transfer | Check the insurer and lender’s portability, assignment and renewal conditions. | Check whether a transfer qualifies as a straight switch and whether any new borrowing changes the rules. |
FCAC’s published illustration
FCAC’s 2025 illustration assumes a $400,000 purchase, a 4% interest rate, 25-year amortization, monthly payments and the insurance premium added to the mortgage. It reports total costs of $643,649 with 5% down, $625,712 with 10% down and $584,979 with 20% down—Financial Consumer Agency of Canada, 2025.
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Those are scenario outputs, not forecasts. The result changes with the purchase price, contract rate, premium, applicable tax, payment frequency, amortization, prepayments and the number of years you keep the mortgage. A borrower who sells or refinances early may experience a different cost ranking from someone who keeps the mortgage to the end of the amortization.
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- Enter the purchase price and each down-payment option.
- Calculate the base mortgage and the LTV for each option.
- Apply the applicable insurer premium and add it to the loan only if you intend to finance it.
- Add provincial tax on the premium where required and include it in closing cash.
- Obtain the actual contract rate and payment for each option from the lender or broker.
- Calculate interest paid through your expected holding period, not only over the full amortization.
- Include expected renewal, portability, sale and refinancing circumstances.
When an insured mortgage may make sense
- You can qualify for the home with a smaller down payment but cannot comfortably assemble 20% without delaying the purchase or exhausting your emergency fund.
- The property and borrower qualify for insurance, and the premium fits your holding-period calculation.
- You value retaining cash for closing costs, repairs or a reasonable reserve more than avoiding the premium.
- The available insured rate, payment and amortization produce an acceptable result after adding the premium and tax.
Do not treat the premium as a reason to minimize the down payment automatically. Borrowing more can increase payment risk and leave less equity if prices fall or selling costs are high.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.When an uninsured mortgage may make sense
- You have 20% or more available without compromising your emergency reserve and near-term obligations.
- The lower principal and absence of an insurance premium outweigh the opportunity cost of tying up more cash in the property.
- You want to avoid premium financing or have a property, loan purpose or LTV that does not qualify for insurance.
- Your lender offers terms that remain attractive after comparing the full interest cost and renewal options.
Uninsured does not mean “no risk” or “automatically cheaper.” A larger down payment can reduce borrowing costs, but the cash has an alternative use: investments, business needs, education, renovations or liquidity. Compare the after-tax return and risk of that alternative with the guaranteed interest cost you avoid by borrowing less.
Renewing or switching lenders: the narrow stress-test exception
As of November 21, 2024, the Office of the Superintendent of Financial Institutions (OSFI) no longer prescribes a minimum qualifying rate for an uninsured “straight switch” at renewal from one federally regulated institution to another when all of these conditions hold:
- The existing mortgage is standalone.
- The loan amount does not increase.
- The remaining contractual amortization does not increase.
This is not a blanket exemption. It does not automatically cover refinancing, debt consolidation, borrowing more, extending amortization, changing the transaction materially or switching to every type of lender. The OSFI letter describes the scope. A lender can still apply its own credit and affordability policies and decline the transfer.
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Questions to ask before a switch
- Is the mortgage truly standalone, with no collateral charge or additional secured borrowing?
- Will the new lender keep the principal and remaining amortization unchanged?
- Will any new fees, appraisal or legal costs erase the rate saving?
- Does the new lender’s prepayment privilege, penalty formula and renewal process suit your plans?
OSFI’s loan-to-income limit is not an individual cap
OSFI limits the volume of a lender’s newly originated uninsured mortgages above a 4.5-times loan-to-income multiple. That is a portfolio-level constraint on the lender, not a universal rule that every borrower above 4.5 times must be rejected. A lender may still approve or decline an individual application based on its underwriting, capacity and risk appetite. See OSFI’s loan-to-income guidance.
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Common mistakes and how to avoid them
Assuming insurance protects the homeowner
It protects the lender against covered default losses. You remain responsible for the mortgage, and a default can still damage your credit and create financial consequences.
Comparing only the monthly payment
A lower payment can result from a longer amortization or a financed premium. Compare principal, premium, tax, interest and the balance remaining when you expect to sell or refinance.
Using a generic premium percentage
The premium changes by LTV, down-payment source, amortization and insurer. Use the insurer’s current schedule and the lender’s written quote.
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Forgetting provincial tax
In Ontario, Manitoba and Quebec, FCAC says tax on the premium is payable upfront. Keep that cash separate from the down payment.
Treating the $1.5-million threshold as self-explanatory
The cap and boundary wording changed after December 15, 2024. At exactly $1.5 million, confirm eligibility rather than relying on a simplified summary.
Assuming 20% down eliminates the stress test
Insured and uninsured mortgages at federally regulated lenders generally use the same qualifying-rate test. The exemption for a narrow uninsured straight switch is a renewal rule, not a purchase rule.
A step-by-step decision process
- Set a safe cash target. Reserve funds for closing costs, immediate repairs and an emergency fund before deciding how much to put down.
- Confirm the property category. Check the number of units, occupancy, purchase price and whether it is an existing home or new build.
- Get both scenarios in writing. Ask for an insured quote at the minimum practical down payment and an uninsured quote at 20% or more.
- Verify the premium and tax. Identify the insurer, LTV band, amortization surcharge, whether the premium is financed and any provincial tax due at closing.
- Apply the stress test. Have the lender show the qualifying rate, payment and debt-service calculation.
- Compare holding-period outcomes. Calculate interest, principal remaining, penalties and transaction costs for the period you realistically expect to keep the mortgage.
- Test a bad month. Make sure the payment remains manageable if income falls, expenses rise or renewal rates are higher.
- Review the contract. Check prepayment privileges, portability, assignment, penalty calculation and renewal terms before signing.
Bottom line for Canadian borrowers
An insured mortgage trades a smaller down payment for a lender-protection premium and, often, a larger financed balance. An uninsured mortgage usually requires at least 20% equity and avoids that premium, but it still faces underwriting and generally the mortgage stress test. Use the actual premium, rate, tax, amortization, payment and expected holding period to decide; neither category is universally cheaper.
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