The Ultimate Guide to CMHC Mortgage Default Insurance in Canada

If you are buying a house in Canada and have less than a 20% down payment, you are legally required to purchase mortgage default insurance. This is most commonly provided by the Canada Mortgage and Housing Corporation (CMHC). While it helps you get onto the property ladder sooner, it adds a massive, hidden cost to your mortgage.

How Does CMHC Insurance Work?

Unlike home insurance, which protects you if your house burns down, CMHC insurance protects the bank if you stop paying your mortgage. Because the bank is protected, they are willing to lend you money with a down payment as low as 5%.

The catch? You have to pay the insurance premium. The cost ranges from 2.80% to 4.00% of your total loan amount, depending on the size of your down payment. The smaller your down payment, the higher the percentage you pay.

The Hidden Cash Trap: Provincial Sales Tax (PST)

This is the part that catches thousands of Canadian homebuyers off guard every year. When you calculate your CMHC premium (which can easily be $15,000 to $25,000), the bank simply adds that total directly to your mortgage balance. You pay it off over 25 years with interest.

However, if you live in Ontario, Quebec, or Saskatchewan, the government charges Provincial Sales Tax (PST) on the insurance premium. You cannot roll the PST into your mortgage. You must pay it in hard cash on closing day.

In Ontario, the PST is 8%. If your CMHC premium is $20,000, you must bring a cheque for an extra $1,600 to your lawyer on closing day. If you don't have that cash, you lose the house.

How to Calculate Your Exact CMHC Fees

Because the math is complicated and changes based on the exact dollar amount of your down payment, do not try to calculate this manually.

Use our dedicated Canada CMHC Mortgage Insurance Calculator. It will instantly tell you your exact premium, and exactly how much PST you will need to pay in cash on closing day based on your specific province.