PMI, LMI, CMHC: Mortgage Default Insurance Compared
Published 26 July 2026
Put down less than 20% on a home in the US, Australia, or Canada, and you'll almost certainly pay for mortgage default insurance, a policy that protects the lender (not you) if you stop paying. All three countries require something in this category for low-deposit borrowers, but the mechanics, the cost, and, most importantly, whether it ever goes away, are genuinely different from one market to the next.
The same purchase, three different insurance bills
Take a $500,000 home purchase with a 10% deposit ($50,000 down, a $450,000 loan, 90% loan-to-value) in each market:
- US, Private Mortgage Insurance (PMI): roughly 0.3% to 1.5% of the loan annually depending on credit score and LTV; a reasonable mid-range estimate at 90% LTV is about 0.75%, or $3,375 a year (about $281 a month), charged as an ongoing premium for as long as PMI stays in place.
- Australia, Lenders Mortgage Insurance (LMI): typically 1% to 5% of the loan depending on LVR, with 90% LVR landing somewhere around 1.5% to 2% of the loan, roughly $7,500 on this loan size, charged as a single one-time premium.
- Canada, mortgage default insurance (CMHC or an equivalent insurer): a fixed premium schedule based on down payment tier; at 10% down (90% LTV) the standard rate is 3.10% of the loan, or $13,950 on this loan size, also a one-time premium.
Three very different bills for a mechanically similar situation, because each market structures the insurance completely differently.
The most important difference: does it ever go away
This is where the three products genuinely diverge, and it's the detail that matters most to a borrower.
US PMI is temporary by design. Under the federal Homeowners Protection Act, PMI automatically terminates once your mortgage balance reaches 78% of the home's original value, based on the scheduled amortization schedule, regardless of whether you ask. You can also request cancellation earlier, once you reach 80% of original value, provided you have a good payment history. Extra principal payments or a rising home value (via a new appraisal, in some cases) can get you there faster.
Australian LMI is a one-time, non-refundable premium. Once paid, it doesn't reduce or cancel as your loan-to-value ratio improves. You paid for the insurance at the point of settlement, based on your LVR at that time, and that's the end of the transaction from an insurance standpoint; building equity afterward doesn't refund any portion of it.
Canadian mortgage default insurance works the same way as LMI: a one-time premium, not cancellable.It's typically added to (capitalized into) the mortgage principal rather than paid upfront in cash, meaning you pay interest on the premium itself for the life of the loan, but it's still a single charge at the time of origination, not an ongoing monthly cost that disappears later.
Why Canada's version is mandatory, not just common
There's a structural difference worth knowing: in Canada, mortgage default insurance on any mortgage with a down payment under 20% is a federal requirement under OSFI regulation, rather than a lender's individual risk decision. Every federally regulated lender must obtain it for a high-ratio (under-20%-down) mortgage; there's no path around it at that deposit level. In the US and Australia, the requirement functions more at the lender-and-loan-program level: it's near-universal in practice for low-deposit conventional loans, but the specific rules and any exceptions are set by individual lenders and loan programs rather than a single blanket federal rule.
Ways to reduce or avoid each one
- PMI: put down 20% or more to avoid it entirely, or pay it down faster once in place, since it's specifically designed to end once you cross the 78-80% original-value threshold. Some loan structures (like a piggyback second mortgage) exist specifically to avoid PMI, though they carry their own trade-offs.
- LMI: the main lever is the same, a 20% deposit avoids it outright, though some professions (certain doctors, accountants, lawyers) qualify for LMI waivers at higher LVRs from specific lenders. LMI can occasionally be transferred to a new lender in a refinance without repaying it in full, depending on the insurer and timing, but this isn't guaranteed and needs to be confirmed case by case.
- CMHC (and equivalent insurers): a 20% deposit removes the requirement entirely, since it's specifically the trigger for federally mandated insurance. Below that threshold, there's no lender-level way around it; it's a regulatory requirement, not a lender preference.
The one number that actually matters for your decision
If you're deciding whether to stretch for a 20% deposit or accept the insurance cost, the real question is how long you'd be paying it and what alternative use that deposit money has. In the US, PMI is a genuinely temporary cost with a clear, calculable end date. In Australia and Canada, the insurance premium is a one-time cost you're paying regardless of how quickly you build equity afterward, which makes the "just get to 20% eventually" argument less relevant since you've already paid for the insurance either way.