Mortgage default insurance is usually required for an eligible purchase with less than 20% down. Its cost is a percentage of the loan amount, and it protects the lender if you default.
Information checked November 11, 2026.
Find the right premium bracket
First calculate the loan before insurance and divide it by the purchase price or lending value the insurer accepts. The CMHC schedule has different brackets. A loan-to-value ratio above 90% and up to 95% typically has a 4% premium under the standard schedule; some terms or types of down payment can change the rate.
Work an Ontario purchase example
On a $750,000 home with $50,000 down, the initial mortgage is $700,000, about 93.3% of the price. At 4%, the premium is $28,000. If added to the mortgage, the balance starts at $728,000 and you pay interest on that larger amount.
At Ontario’s 8% retail sales tax on the premium, the cash tax in this example is $2,240. Budget that amount at closing; it is separate from the premium added to the mortgage.
Compare the full cost before changing the down payment
Ask your lender for the insurance, mortgage rate, payment and closing cash with two down payments. Keep enough money for other closing costs, the move and repairs. An insured purchase also has eligibility rules, so use the quoted scenario for your property and borrower profile.
Compare insurance cost and cash left at closing
Consider two down payment options on the same $750,000 purchase: the $50,000 illustration above and a larger contribution. Ask for the qualifying loan, insurance premium, any cash tax and the final financed balance in both. A larger contribution may reduce the premium and payment, but it also changes how much you can retain for closing and repairs.
Check the rate and contract as well as the insurance. If the two loans use a different product or amortization, show that beside the numbers. Comparing only the premium does not explain which option fits the household.
A practical decision checklist
Confirm lending value and loan amount
Use the value accepted by the lender and insurer to determine the loan-to-value ratio. Ask for the loan before insurance, the applicable ratio and premium bracket. A short note is enough if it records what you checked, who can confirm it and when you need the answer. Carry that note into your next conversation rather than relying on memory.
An appraisal or lending value different from the price can change the cash needed. Recalculate using the final approved property and loan figures. Use the result to choose one practical next step and a fallback if the answer is delayed.
Find the premium for the exact program
Compare the standard insurer schedule with the lender’s written estimate for this property and borrower. Ask about any adjustment for amortization, down-payment source or special program. Take the unresolved difference to the person who can verify the terms.
A general chart may not capture every product or eligibility requirement. Ask which premium and loan balance will actually be shown in the documents. Test the conclusion against a second piece of evidence when one is available. A single estimate can be useful, but a different date, service or starting figure can explain an apparent discrepancy.
Separate premium from Ontario tax
Ask whether the premium is paid upfront or added to the mortgage. Put any applicable Ontario tax on a separate line in the closing budget. Keep the estimate and the confirmed answer in separate columns. An estimate helps you set a range; a confirmed answer gives you something you can use to make the next commitment.
Financing the premium does not generally mean the tax can be financed in the same way. Use the closing cash worksheet and have the lawyer verify the final amount. Give yourself time to get an updated answer before accepting a deadline or giving up another choice.
Compare the payment and total borrowing
If you add the premium to principal, the mortgage balance and interest calculation start higher. Request a payment and balance after the same term for each down payment option. If you cannot confirm it in time, check the alternatives while they are still available.
A lower insured rate may offset part of a premium, but compare costs using the actual quotes. Mark the rate, balance, premium and all cash due together. Review this before making the commitment it affects. When someone else has to supply a document or complete a check, ask how long that work normally takes and allow for a delay.
Keep liquidity in the comparison
A larger down payment can reduce borrowing and may move you into another insurance bracket. List the money left for moving, repairs and other unexpected costs in each scenario. Put the source and the date next to the result. This makes it possible to tell whether a later change came from new evidence or from a change in your own assumptions.
Reducing the insurance charge is less useful if you have to borrow again for ordinary closing expenses. Choose the option with a workable reserve and have the lender confirm eligibility. Write down the decision you can make now and the one that still needs an answer.
Know what the insurance protects
Mortgage default insurance protects the lender against default. Review separate home insurance and any optional coverage with the appropriate provider. Check the outcome under a modest change before you decide how much room to leave.
Paying default insurance does not cover a buyer’s lost income, repairs or mortgage payments. Put each product and its actual purpose in the budget to avoid confusing them. Identify which part of your plan depends on this information. It is easier to decide what to verify first when you know whether it affects the price, the timetable, or your ability to proceed.
Follow-up questions
Is the premium based on the purchase price?
Typically the premium is a percentage of the mortgage amount before the premium, with the rate set by the loan-to-value bracket and the program. Ask for the exact calculation based on the accepted lending value and the mortgage.
How do I know if I should put more down?
Ask for two complete quotes and compare premium, rate, monthly cost, remaining balance, closing cash and savings left over. The better choice depends on both borrowing cost and whether the purchase leaves enough accessible cash after closing.
Use the figures for the actual borrower and property rather than relying on an example alone. Recheck if the price, appraisal or down payment changes.
Related GTAHome guides
- How much mortgage can I afford in the GTA?
- How much down payment do I need to buy a home in Ontario?
- What are the closing costs when buying a home in Ontario?
- How do I get preapproved for a mortgage in Canada?
- How does the mortgage stress test affect what I can buy?
