Buying a home with less than a 20 percent down payment in Canada often requires an additional layer of protection for the lender called mortgage default insurance. Many first-time buyers are unfamiliar with what it does or how it affects monthly payments.

The Ryan Sellers Real Estate Group helps Edmonton buyers navigate financing requirements by clarifying what lenders look for before mortgage approval. CMHC insurance is one of the most important considerations when preparing to purchase with less than 20 percent down.

What CMHC Insurance Is

CMHC mortgage default insurance protects the lender if the borrower cannot make mortgage payments. It does not cover the homeowner or serve as property insurance. Instead, it enables lenders to approve mortgages for buyers with a lower down payment by reducing lending risk. This insurance does not provide income or life protection, which fall under separate mortgage protection insurance products.

CMHC stands for Canada Mortgage and Housing Corporation, the national agency responsible for administering this type of mortgage protection. Alternative providers such as Sagen and Canada Guaranty may be used in some cases, although CMHC remains the most commonly referenced insurer.

When CMHC Insurance Is Required

CMHC insurance is mandatory in Canada when a buyer provides less than a 20 percent down payment on a primary residence. The minimum down payment is five percent for properties up to the federal mortgage limit, increasing to ten percent on the portion above that amount. Insurance is typically limited to owner-occupied homes. CMHC-insured mortgages must meet Canada’s mortgage stress test and stay within a maximum amortization period of 25 years.

If the down payment reaches 20 percent or more, mortgage default insurance is not required. Buyers using high-ratio mortgages must also meet income stability, credit score minimums, and debt servicing criteria to qualify.

How Premiums Work and Are Calculated

Premiums are calculated as a percentage of the mortgage amount based on the size of the down payment. Buyers may pay between 2.80 and 4.00 percent of the mortgage total depending on how close their down payment is to the minimum threshold. In most cases, the premium is rolled into the mortgage and paid over time through monthly mortgage payments.

While this enables earlier market entry, it increases the total mortgage balance and long-term interest costs. Buyers providing less than ten percent down usually fall into the highest premium category.

Why CMHC Insurance Matters for Buyers in Edmonton

Edmonton buyers often use CMHC-insured mortgages to purchase earlier rather than waiting to accumulate a full 20 percent down payment. Local home values are generally more affordable than those in major metropolitan areas, making it possible for buyers to secure financing with five or ten percent down while still maintaining manageable payment structures. Access to financing basics early in the planning stage helps buyers make these decisions with more confidence.

The trade-off is higher monthly payments over time. Buyers must also meet income verification standards, credit requirements, and mortgage stress test criteria before approval.

When You May Not Need CMHC Insurance

Buyers who can provide 20 percent or more down payment are not required to carry mortgage default insurance. Some conventional mortgage products may also qualify without insurance if the loan-to-value ratio is sufficiently low. Older homes or properties with significant deficiencies may not qualify for insurance until repairs or upgrades meet minimum safety or structural thresholds.

Final Considerations and Next Step

CMHC insurance helps buyers access mortgage financing but does not reduce responsibility for future payments. Consider whether saving for a larger down payment provides long-term savings or if entering the market earlier offers greater strategic benefit. Understanding amortization limits, qualification requirements, and premium impact helps forecast ownership costs more accurately.

If you would like guidance on CMHC requirements, mortgage pre-approval strategies, or down payment planning, connect with an Edmonton real estate professional to discuss your options directly.