CMHC Mortgage Insurance in BC: When It Is Required and Who Pays

If you are putting less than 20% down on a home in British Columbia, your lender will almost certainly talk about default insurance, often called CMHC insurance. Many buyers are surprised to learn who the insurance actually protects and that they usually end up paying for it.

This article explains when insurance is required, how the premium is set, how it can be added to your mortgage and what limits apply to insured loans.

This article covers the law of British Columbia.

What mortgage loan insurance is

Mortgage loan insurance protects the lender if the borrower cannot make payments. It is there for the lender's benefit rather than yours. What it means for you if you fall behind on payments depends on your situation, so it is worth confirming with a lawyer.

The lender pays the premium but likely passes the cost on to the borrower, who can pay a lump sum or add it to the mortgage and pay it over time.

When it is required

Insurance is typically needed if your down payment is less than 20% of the purchase price. There is an exception: a lender may require insurance even with 20% down, usually if you are self-employed or have a poor credit history.

There is also a ceiling. Mortgage insurance is not available on homes priced at $1.5 million or more, so a buyer at that price needs 20% down and an uninsured mortgage. The cap rose from $1 million to $1.5 million effective December 15, 2024. Some consumer pages still use the older $1 million wording, so confirm the position with your lender if your price is close to the cap.

The minimum down payment by price

The smallest down payment you can make depends on the purchase price. For a price of $500,000 or less, it is 5% of the purchase price. For a price between $500,000 and $1.5 million, it is 5% of the first $500,000 plus 10% of the amount above $500,000. For a price of $1.5 million or more, it is 20% of the whole purchase price.

As a worked example, on a $1 million home the minimum is 5% of $500,000 ($25,000) plus 10% of $500,000 ($50,000), which is $75,000, but only if the lender and insurer accept it. Normally the minimum down payment must come from your own funds.

What the premium costs

For CMHC homeowner loans, the premium is a percentage of the total loan amount, and it rises as your loan-to-value (LTV) ratio rises.

The premium is a one-time charge that may be added to the insured loan. Adding it means you borrow more and pay interest on it over time, so ask your lender to show you the total cost both ways.

Eligibility limits to know about

• Owner occupancy: CMHC homeowner loans are for homes intended for owner occupancy, with a price or lending value below $1,500,000.
• Small rentals: rental and investment properties are not eligible for the 5%-down homeowner product, and CMHC's maximum for small rental loans is $1,000,000.
• Unit count: 1 to 2 unit homes allow a maximum 95% LTV, while 3 to 4 unit homes need 10% down, for a maximum 90% LTV.
• Amortization: the maximum for insured purchase loans is 25 years, with 30 years available through CMHC Home Start. Since December 15, 2024, 30-year amortizations are available to all first-time home buyers and all buyers of new builds.
• Down payment source: normally it must be your own funds, though some 1 to 2 unit borrowers with a strong credit history may use a non-traditional source at 90.01% to 95% LTV.

What to do next

• Calculate your down payment as a percentage of the price to see whether insurance will be required.
• Ask your lender whether the premium will be added to the mortgage or paid up front.
• Ask what the total cost looks like at the amortization you are choosing.
• If you are self-employed, ask early whether the lender will require insurance even with 20% down.
• Have a lawyer review your mortgage commitment if any term is unclear.

Getting pre-approved can help you plan. Lenders review your assets, income and debt to estimate the most they might lend and at what rate, but the process does not guarantee approval, and the rate can be locked for 60 to 130 days depending on the lender. A pre-approved amount is a ceiling, not a commitment, and the lender can still refuse after pre-approval.

• Ask how long the pre-approved rate is guaranteed, whether you automatically get a lower rate if rates fall, and whether the pre-approval can be extended.
• Expect to provide ID, proof of employment, and proof of your down payment and closing costs. If you are self-employed, expect to provide two years of CRA notices of assessment.

Frequently asked questions