Mortgage insurance in Canada protects the lender, not you. That’s the first thing most buyers miss, and it’s why the fee feels frustrating: you pay it, but the lender is the beneficiary.
When it’s required
If your down payment is under 20%, insurance is required. That’s a hard rule for high‑ratio mortgages. It doesn’t matter how strong your income is — if the down payment is below 20%, the loan must be insured.
How the premium is set
The premium is based on loan‑to‑value (LTV):
- Lower down payment = higher premium
- Higher down payment = lower premium
The premium is usually added to your mortgage balance, which means you pay interest on it too.
What insurance does not change
Insurance doesn’t make other borrowing rules disappear:
- Minimum down payment rules still apply
- Stress test rules still apply
- Penalties and fees still apply
If your down payment is below the minimum for your purchase price, you are not eligible — even with insurance. The insurance doesn’t “fix” that.
The $1,000,000 line
Once a home is $1,000,000 or more, you need a minimum 20% down payment and the mortgage is not insurable. This is a common surprise for buyers comparing condos vs small houses in expensive markets.
The real cost tradeoff
Insurance makes the mortgage possible, but it also increases the total cost of borrowing. It’s the tradeoff for putting less cash down:
- You buy sooner with a smaller down payment
- You pay a higher premium over time
Sometimes that’s worth it. Sometimes waiting and saving the extra down payment is the cheaper option.
Practical advice
Use the insurance estimate as a planning number, then confirm the exact premium with your lender. If you’re close to 20% down, do the math carefully — the premium can be the difference between “affordable” and “too expensive.”