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Down payment under 20%? You need mortgage insurance.

 4 minute read


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You’ve finally saved enough for a down payment on your first home. It’s not the full 20% you’ve heard your whole life, but it’s enough to get into the market at a price you can afford. You never thought this day would come, yet here you are.

But before you jump headfirst into home ownership, you need to know about several other factors that can impact the upfront costs of qualifying for a mortgage – including mortgage default insurance.

What is mortgage default insurance?

If you have a down payment lower than 20% of the purchase price of the home, your mortgage is considered high ratio. In Canada, all high-ratio mortgages are required by law to be insured.

In Canada, these three institutions offer mortgage default insurance:

Mortgage default insurance doesn't mean that you’re a risky borrower or anything about your credit. It simply means you have less collateral in the form of a down payment, and the lenders are required by law to take extra precautions.

Can I refuse mortgage default insurance?

You will not be able to get a mortgage in Canada with less than 20% down without mortgage default insurance. The only cases where you won’t require it are:

  • If the property is valued at over $1,000,000
  • If it’s a refinanced mortgage
  • If the amortization period is longer than 25 years

How is this insurance premium calculated?

The premiums you pay on your mortgage default insurance may depend on your loan-to-value ratio. However, these rates are subject to change, should the insurer change their premiums.

Owner-occupied properties with 1-4 units

Loan-to-Value ratio
Premium on Total Loan Amount
Premium on Increase to Loan Amount for Portability*
Up to an including 65% 0.60% 0.60%
65.01% to 75% 1.70% 5.90%
75.01% to 80% 2.40% 6.05%
80.01% to 85% 2.80% 6.20%
85.01% to 90% 3.10% 6.25%
90.01% to 95% 4.00% 6.30%

Non-owner-occupied properties with 2-4 units

Loan-to-Value ratio
Premium on Total Loan Amount
Premium on Increase to Loan Amount for Portability*
Up to an including 65% 1.45% 3.15%
65.01% to 75% 2.00% 3.45%
75.01% to 80% 2.90% 4.30%

*The premium is calculated by multiplying the applicable Premium Rate by the Total Loan Amount (less any available Premium Credits), or the applicable Premium Rate to the Increase to Loan Amount, whichever is less.

How do I find out my loan-to-value ratio?

To get your loan-to-value ratio, divide the principal mortgage amount by the purchase price, or the market value if lower. The principal mortgage amount is the purchase price after the down payment.

Here’s an example of how this math looks in action:

Purchase Price
Down Payment
Principal Mortgage Amount
Loan-to-value Ratio


In this scenario, the loan-to-value ratio is 95%; as this chart shows, the premium on the total loan amount would be 4.00%. This means the premium is 4% of $475,000, which is $19,000.

How long do I have to pay the mortgage default insurance premium?

This premium is paid for the length of your amortization period. It is added to the principal amount of your mortgage loan and does not contribute to the principal.

What happens if I switch my mortgage?

When it comes time for renewal – or even before – sometimes you find a great deal at another lender and want to switch your mortgage. But what does that mean for your mortgage default insurance premiums?

All three mortgage default insurance providers in Canada make it simpler to switch with portability options:

  • Straight portability, where there is no additional premium required
  • Portability-with-increase, where an additional premium is required, but may be offset with premium credits determined by each provider.

Get the right mortgage for you

Buying a home is one of the biggest financial decisions you’ll ever make, so let’s make sure it works for you just as much as you’ve worked hard for it. Find a branch near you, give us a call, or apply for a mortgage online to get started.