Who pays for mortgage insurance on an insured mortgage?

The borrower pays the premium, usually by adding it to the mortgage balance. However, the insurance protects the lender against loss if the borrower defaults; it does not protect the borrower.

Can I avoid needing an insured mortgage?

Yes. If you put down 20% or more of the purchase price, you have a conventional (uninsured) mortgage and do not pay a default-insurance premium. Many buyers weigh buying sooner with insurance against saving longer to reach 20%.

Is the insurance premium refundable?

The premium is generally non-refundable once paid, though a partial refund may apply in limited cases such as buying an energy-efficient home under certain programs. Most borrowers treat it as a one-time cost of borrowing with less than 20% down.

Mortgage Glossary

What is Insured Mortgage?

An insured mortgage is a home loan where the down payment is less than 20% of the purchase price, so federal rules require mortgage default insurance. The borrower pays the insurance premium, which protects the lender if the borrower defaults. This insurance lets buyers purchase with as little as 5% down.

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Quick answer

Also known as: high-ratio mortgage, default-insured mortgage

Key points

Required when the down payment is under 20% of the purchase price.
Provided by CMHC, Sagen, or Canada Guaranty.
The borrower pays the premium, but it protects the lender.
Premium percentage rises as the down payment shrinks.
Standard program caps purchase price under $1 million.
Insured loans often qualify for competitive rates.

Insured Mortgage explained

In Canada, any mortgage with a down payment below 20% of the purchase price must carry mortgage default insurance. Because the loan covers more than 80% of the value, it is also called a high-ratio mortgage. The insurance is provided by CMHC, Sagen, or Canada Guaranty, and the borrower pays a one-time premium, usually added to the mortgage balance.

The premium scales with the loan-to-value ratio: the smaller the down payment, the higher the premium percentage. Insured mortgages have eligibility limits, including a purchase price under $1 million for the standard program and a maximum 25-year amortization in many cases. Because the loan is insured, lenders take on less risk and often offer competitive rates.

What a Insured Mortgage is for

Insured mortgages exist to open homeownership to buyers who cannot save a full 20% down payment. By shifting default risk to an insurer, the system lets lenders extend high-ratio loans they would otherwise avoid, while protecting the financial system. The insurance benefits the lender, not the borrower, even though the borrower pays for it.

How it can help you

An insured mortgage helps you buy sooner by reducing the cash needed up front, often to as little as 5% on the first $500,000 of the price. Because the lender is protected, insured borrowers frequently qualify for attractive rates. Comparing lenders still matters, since premiums and pricing vary. Lenderoo shops 40+ lenders for free so you can find the best fit for a high-ratio purchase.

When it comes up

A first-time buyer with $30,000 saved wants a $500,000 condo but cannot reach the $100,000 needed for 20% down. With an insured mortgage they put 5% ($25,000) down, pay a default-insurance premium added to the loan, and become homeowners years earlier than if they waited to save a conventional down payment.

Example: Premium on a high-ratio loan

You buy a $400,000 home with 5% down, or $20,000. That leaves a $380,000 mortgage, a loan-to-value ratio of 95%.

At that ratio the default-insurance premium is around 4% of the loan, roughly $15,200. This premium is typically added to the mortgage, so you would finance about $395,200 rather than paying the premium in cash up front.