TL;DR
The right decision is not just "insured or uninsured". It is about all-in affordability, cash flow resilience, and flexibility over the first 3 to 5 years.
What mortgage default insurance actually does
FCAC defines mortgage loan insurance as protection for the lender if you cannot make mortgage payments. It is commonly called mortgage default insurance.
This insurance can help buyers enter the market with a lower down payment, but it adds a premium cost that should be modeled before you submit an offer.
When default insurance is required in Canada
FCAC's current guidance on minimum down payment is
| Purchase price | Minimum down payment | Insurance implication |
|---|---|---|
| $500,000 or less | 5% | Usually insured if down payment is below 20% |
| $500,000 to $1.5 million | 5% of first $500,000, then 10% on remainder | Usually insured if down payment is below 20% |
| $1.5 million or more | 20% | Typically uninsured structure |
Current CMHC premium bands (consumer reference)
CMHC's consumer premium table currently lists the following premium rates on total loan amount by loan-to-value ratio:
| Loan-to-value (LTV) | Premium on total loan |
|---|---|
| Up to and including 65% | 0.60% |
| 65.01% to 75% | 1.70% |
| 75.01% to 80% | 2.40% |
| 80.01% to 85% | 2.80% |
| 85.01% to 90% | 3.10% |
| 90.01% to 95% | 4.00% |
| 90.01% to 95% with non-traditional down payment | 4.50% |
Premiums and provincial tax treatment vary by province and insurer terms. Confirm your lender's exact premium and tax treatment before closing.
Alternatives framework: 5 ways buyers handle insurance trade-offs
- Proceed insured now: useful when entry timing matters more than minimizing financed premium cost.
- Increase down payment to reduce LTV: lowers premium band and ongoing payment pressure.
- Target 20% down: removes insured premium but may delay purchase timeline.
- Buy at a lower price point: can improve affordability and reduce insurance burden.
- Wait and strengthen file: useful when current debt or payment risk is already tight.
Cost model before you decide
- Home price, down payment, and resulting LTV.
- Premium estimate and whether it is financed into the mortgage balance.
- Payment difference with and without premium-financed balance.
- Emergency cash reserve after down payment and closing costs.
- Rate-stress scenario to test payment resilience.
Behavior traps that lead to expensive decisions
| Mental model | Common trap | Pragmatic correction |
|---|---|---|
| Anchoring | Fixating on down payment minimum and ignoring payment durability. | Model full monthly payment and reserve impact before offering. |
| Present bias | Choosing the fastest path without checking 3-5 year cost. | Compare insured now vs delayed purchase under one timeline model. |
| Regret aversion | Avoiding decisions because premium math feels complex. | Use a simple scorecard and ask lender for written premium assumptions. |
Best next step
If you plan to buy in the next 6 months, run an insurance-aware affordability plan before writing an offer.
