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In Canada, homebuyers with less than 20% down payment are required to purchase mortgage default insurance or CMHC insurance. Mortgage default insurance protects lenders in the event a home buyer defaults on a mortgage. Thanks to this protection, lenders can offer lower mortgage rates for higher-risk mortgages and mortgages with lower down payments.

CMHC insurance regulation and premium rates in Ontario are the same across Canada. Insurance premium rates range from 1.80% to 4.00% of your mortgage amount. Federal regulations on CMHC insurance include the following:

  • CMHC insurance must be purchased for all homes with less than 20% down payment.
  • Homes purchased for more than $1 million are not eligible for CMHC insurance, therefore requiring homeowners to put more than 20% down.
  • The maximum amortization period on CMHC insured mortgages is 25 years.
  • Homes sold over $500,000 can no longer be purchased with a 5% down payment. The new minimum down payment is 5% of the first $500,000, and 10% of any amount over $500,000.

The CMHC insurance premium is added to your mortgage amount and is paid off over your amortization period through monthly mortgage payments

PST on Mortgage Default Insurance – Ontario

Ontario charges PST on mortgage default insurance. In Ontario, this tax is 8% of the CMHC insurance premium and must be paid in full when your house closes. The PST is therefore different from the premium as it is not added to your mortgage balance.