What is CMHC mortgage insurance and do I have to pay it?

CMHC mortgage default insurance (commonly called mortgage insurance or mortgage loan insurance) is a mandatory policy that protects the lender — not you — if you stop making mortgage payments. It is required whenever your down payment is less than 20% of the purchase price. CMHC (Canada Mortgage and Housing Corporation) is the federal Crown corporation that provides most of this insurance in Canada; private insurers Sagen and Canada Guaranty also offer equivalent coverage.

The insurance premium is calculated as a percentage of the insured mortgage amount, and the rate increases as the loan-to-value ratio rises (i.e., the smaller your down payment, the higher the premium). The premium is not paid upfront in most cases — it is added to your mortgage principal and repaid over the life of the mortgage, which means you also pay interest on it.

The benefit of insured mortgages is that lenders accept lower down payments because their risk is covered. This is what makes home ownership accessible for buyers who have not yet saved a 20% down payment.