Insurance5 min read
How CMHC/SCHL Insurance Works
Understand mortgage default insurance in Canada.
CMHC (SCHL in French) is mortgage default insurance required when your down payment is less than 20%. It protects the lender, not you — but it lets you buy with as little as 5% down.
When it's required
- Down payment below 20% on a home priced under $1.5M
- Owner-occupied or second home (not rental)
- Maximum 25-year amortization (30 years for some first-time buyers and new builds)
How the premium is calculated
The premium is a percentage of the mortgage amount, scaling with loan-to-value (LTV).
- Up to 65% LTV: 0.60%
- Up to 75% LTV: 1.70%
- Up to 80% LTV: 2.40%
- Up to 85% LTV: 2.80%
- Up to 90% LTV: 3.10%
- Up to 95% LTV: 4.00%
Example
On a $500,000 home with 5% down ($25,000), the insured mortgage is $475,000. Premium is 4.00% = $19,000, added to the mortgage. New principal: $494,000.
Pros and cons
- Pro: buy sooner with less savings
- Pro: insured mortgages often get a slightly lower rate
- Con: premium adds thousands to what you owe
- Con: PST on the premium is payable upfront in ON, QC and SK
Key takeaways
- Required below 20% down
- Premium is added to the mortgage, not paid in cash
- Insured rates can be lower than uninsured
- Avoidable by saving 20% — but the math doesn't always favor waiting
Sources used
Disclaimer: This guide is for educational purposes only and does not constitute financial, mortgage, legal, or tax advice. Always verify details with qualified professionals and financial institutions.