How Much Is CMHC Insurance?
Published
Buy in Canada with less than 20 per cent down and your lender must insure the mortgage. The premium runs from 0.60 to 4.00 per cent of the loan depending on your loan-to-value ratio, and almost every buyer adds it to the mortgage rather than paying cash. That choice is where the real cost sits. A $26,600 premium capitalised at 4.5 per cent over 25 years costs about $44,355 by the time the mortgage is gone.
What the premium costs at each down payment
The rates are set by CMHC and matched by the two private insurers, Sagen and Canada Guaranty, so the insurer your lender happens to use makes no difference to your bill. On a $700,000 home:
| Down payment | Mortgage | LTV | Premium rate | Premium |
|---|---|---|---|---|
| $35,000 (5%) | $665,000 | 95.0% | 4.00% | $26,600 |
| $70,000 (10%) | $630,000 | 90.0% | 3.10% | $19,530 |
| $105,000 (15%) | $595,000 | 85.0% | 2.80% | $16,660 |
| $140,000 (20%) | $560,000 | 80.0% | none | $0 |
Why the tier line matters more than the deposit
Moving from a 5 per cent to a 10 per cent down payment on that house saves $7,070 of premium. It is tempting to read that as a reward for saving another $35,000, but the arithmetic says otherwise. Only $1,400 of the saving comes from borrowing less. The other $5,670 comes from crossing out of the 95 per cent tier into the 90 per cent one, where the rate drops from 4.00 to 3.10 per cent.
Four fifths of the benefit is the tier change. That is worth knowing if your deposit lands just short of a boundary, because the last few thousand dollars are doing far more work than the first few.
What capitalising the premium really costs
The premium can be paid at closing or added to the mortgage. Adding it is the normal choice, and it converts a one-off cost into 25 years of interest. At 4.5 per cent:
| Down payment | Premium | Added to the payment | Total cost over 25 years |
|---|---|---|---|
| 5% | $26,600 | $147.85 a month | $44,355 |
| 10% | $19,530 | $108.55 a month | $32,566 |
| 15% | $16,660 | $92.60 a month | $27,781 |
The ratio is the same in every row: capitalising costs about 1.67 times the premium. If you can pay any part of it at closing, that is a 4.5 per cent guaranteed saving on whatever you pay, which is a better return than most places you could put the money.
The tax you are not allowed to finance
Ontario, Quebec and Saskatchewan charge provincial sales tax on the insurance premium. CMHC states plainly that this tax cannot be added to the loan amount, which makes it different from the premium itself. It has to come out of your pocket at closing, alongside your land transfer tax and legal fees.
It is a modest sum next to the premium, but it is cash rather than financing, and it appears in very few online estimates. If you are buying in one of those three provinces, ask your lender for the figure early rather than discovering it on your closing statement.
The cliff at $1.5 million
Insured financing stops at a purchase price of $1.5 million. Below it, the minimum down payment is 5 per cent of the first $500,000 and 10 per cent of the rest. Above it, no insurer will cover the mortgage and you need a conventional loan with at least 20 per cent down.
| Purchase price | Minimum down payment | As a share of price |
|---|---|---|
| $500,000 | $25,000 | 5.0% |
| $700,000 | $45,000 | 6.4% |
| $1,000,000 | $75,000 | 7.5% |
| $1,500,000 | $125,000 | 8.3% |
| $1,600,000 | $320,000 | 20.0% |
Read the last two rows together. Paying $100,000 more for the house raises the deposit you need by $195,000. For anyone shopping near the cap in Toronto or Vancouver, that boundary matters more than the asking price.
How the premium feeds back into your ratios
A capitalised premium raises the mortgage, which raises the payment, which raises both debt service ratios the lender tests you against. The $147.85 a month from the 5 per cent case counts as housing cost in the GDS calculation and again in TDS. On a tight application it can be the difference between approval and a decline, so it is worth modelling before you set your price ceiling. The mechanics of those ratios are covered in GDS and TDS explained.
The 30-year option and what it adds
First-time buyers, and anyone buying a newly built home, can take a 30-year amortization on an insured mortgage. It lowers the monthly payment but adds a 0.20 percentage point surcharge to every premium tier. At 5 per cent down the rate goes from 4.00 to 4.20 per cent, which is about $1,330 more on a $665,000 mortgage. At 10 per cent down it is about $1,260.
A note on the figures
Premium rates are CMHC's published schedule: 0.60 per cent up to 65 per cent LTV, 1.70 to 75, 2.40 to 80, 2.80 to 85, 3.10 to 90 and 4.00 to 95, with a 0.20 point surcharge for amortizations beyond 25 years. Sagen and Canada Guaranty use the same rates. Premiums here are calculated on the mortgage amount, and the capitalised cost uses standard monthly amortization at 4.5 per cent over 25 years. Your own rate, and therefore the interest on the premium, will differ. Provincial sales tax in Ontario, Quebec and Saskatchewan is excluded from the tables above because it is paid separately in cash. Check your own numbers in the CMHC insurance calculator.