How much down payment do I need if I have mortgage default insurance?

The benefit of this mortgage insurance is that you can buy a home with a minimum down payment of 5% on properties valued up to $500,000. For properties valued between $500,000 and $1,499,999, you need 5% down for the first $500,000 and 10% down for the remaining portion. Mortgage default insurance is not available for homes worth $1,500,000 and over. The maximum amortization is 30 years for First-Time Homebuyers or 30 years for customers purchasing an owner-occupied newly built home (New Construction) or 25 years for the other insured programs.

Who provides mortgage default insurance?

This type of insurance is offered by insurers such as the Canada Mortgage and Housing Corporation (CMHC), Sagen (formerly known as Genworth Financial Canada), Canada Guaranty Mortgage Insurance Company or another approved private insurer.

You, the home buyer, pay the mortgage insurance. It’s a one-time charge that you can pay in a lump sum when your mortgage begins or you can have the amount added to your mortgage balance and pay it off over time. There may also be applicable government sales taxes, which must be paid up front. As your lender, BMO will apply for the purchase of mortgage insurance during your approval process.

Mortgage default insurance covers the lender in the case the homeowner defaults on the mortgage.

Mortgage Default Insurance

Mortgage default insurance (also known as mortgage insurance) allows you to buy a home with a down payment of less than 20%. You can secure a competitive interest rate with a smaller down payment and have the opportunity to get into the housing market earlier.

Mortgage default insurance is required by the Government of Canada when your down payment is less than 20% and will protect your lending institution in the event that you are unable to make your mortgage payments.

Default insured mortgage refinancing is also offered to allow homeowners to access the equity in their homes to finance the construction of secondary suites on the subject property. Refinances are eligible for properties valued up to $2 million to a maximum loan to value (LTV) of 90%.

The benefit of this mortgage insurance is that you can buy a home with a minimum down payment of 5% on properties valued up to $500,000. For properties valued between $500,000 and $1,499,999, you need 5% down for the first $500,000 and 10% down for the remaining portion. Mortgage default insurance is not available for purchases on properties worth $1,500,000 and over. For refinances for the purpose of financing the construction of a legal secondary unit, mortgage default insurance is not available for properties worth $2,000,000 and over. The maximum amortization is 30 years for First-Time Homebuyers, customers purchasing an owner-occupied newly built home (New Construction) and customers refinancing their property for the purpose of building a secondary legal unit or 25 years for the other insured programs.

How much will it cost me?

Mortgage insurance costs are calculated by multiplying the amount of funds you borrow by the default insurance premium, which typically varies between 0.6% and 6.6%. Your premiums will vary depending on your mortgage amount, the amortization period and the size of your down payment.

The insurance premium is determined by calculating your loan-to-value (LTV) ratio. You can do this by dividing the amount you’re borrowing by the value of the property. The higher your LTV ratio, the higher your premium will be.

You can find examples of current mortgage loan insurance premiums at the CMHC.

Example insurance cost calculation

Example insurance cost calculation
Property value	$450,000	$450,000
Down payment, footnote 1,	5% or $22,500	10% or $45,000
Mortgage loan	$450,000 minus $22,500 = $427,500	$450,000 minus $45,000 = $405,000
Amortization	25 years	25 years
Loan-to-value ratio	$427,500 divided by $450,000 = 95%	$405,000 divided by $450,000 = 90%
Premium	$427,500 times 4.00%,footnote 2,	$405,000 times 3.10%,footnote 2,
Default insurance cost	$17,100	$12,555

footnote 1, A minimum 5% down payment is required for a purchase price of $500,000 or less. For a purchase price between $500,000 and $1,499,999, the minimum down payment is 5% on the first $500,000 and 10% of the remaining balance. A home purchase price of $1,500,000 and over is not eligible for mortgage default insurance and requires a minimum down payment of 20%. A home refinance for the purpose of financing the construction of a secondary legal unit for homes valued at $2,000,000 and over is not eligible for mortgage default insurance and must follow conventional refinance program parameters.

footnote 2,The standard premium charged for a 90% and 95% loan-to-value ratio mortgage (as at September 22, 2023)

Note: The cost of default insurance is subject to change if the purchase price or appraised value, the amount of down payment or the amortization changes. The final premium and the cost of your mortgage default insurance will be disclosed in your mortgage commitment/loan document. ® Registered trade-marks of Bank of Montreal.

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Mortgage Default Insurance

Example insurance cost calculation

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