Insured Mortgage Premiums

The standard calculation is: base mortgage × applicable premium rate = insurance premium. The base mortgage is generally the amount needed after the borrower’s cash down payment, before the insurance premium itself is capitalized. The applicable premium percentage is driven primarily by LTV and the insurance product.

If the premium is added to the mortgage, the final mortgage balance becomes base mortgage + premium. That distinction matters because the premium band is determined from the underlying insured loan/LTV calculation; you do not repeatedly recalculate the premium on top of itself.

CMHC’s current standard homeowner schedule for amortizations of 25 years or less increases as LTV rises. Sagen’s standard public schedule uses the same headline bands, while specialty programs can use different rates.

A dollar of extra down payment always reduces the base mortgage, but enough extra down payment to cross an insurance band can also reduce the percentage applied to the entire insured loan. That creates a breakpoint effect. Moving from just above 90% LTV to 90% or below, for example, changes the standard CMHC premium rate from 4.00% to 3.10%.

This does not mean every borrower should spend enough cash to hit the next band. The cash has another job: closing costs, emergency reserves and post-closing resilience. The useful comparison is the premium saved versus the liquidity sacrificed.

CMHC applies a 0.20% surcharge when an eligible insured amortization exceeds 25 years. Sagen and Canada Guaranty publish the same additional 0.20% for eligible 30-year purchase mortgages. At 90.01%–95% LTV, that moves the standard 4.00% premium to 4.20%.

The surcharge is only the first cost of choosing 30 years. The longer amortization also repays principal more slowly and can produce more interest over time. Insured Mortgage Amortization isolates that separate trade-off.

Ontario applies 8% Retail Sales Tax (RST) to taxable insurance premiums. CMHC also states that provincial sales tax on the mortgage insurance premium cannot be added to the insured loan amount. In an Ontario purchase, the insurance premium can usually be capitalized into the mortgage, but the tax on that premium must be funded separately at closing.

This is easy to miss because a borrower may think “the insurance is rolled into the mortgage.” The premium can be; the Ontario tax on that premium cannot.

For a $900,000 owner-occupied purchase, the current minimum down payment is $65,000: 5% of the first $500,000 ($25,000) plus 10% of the remaining $400,000 ($40,000). The base mortgage is therefore $835,000, or about 92.78% LTV.

At a standard 25-year insured amortization, the current 4.00% premium is $33,400, producing a mortgage balance of $868,400 if the premium is capitalized. Ontario’s 8% RST on that premium is $2,672, payable from closing cash.

If the borrower qualifies for a 30-year insured amortization, the 4.20% premium would be $35,070, producing a mortgage balance of $870,070. Ontario RST would be $2,805.60. The 30-year option therefore adds $1,670 of insurance premium before considering the extra interest caused by carrying the debt longer.

When the premium is capitalized, it becomes mortgage principal. The borrower then pays mortgage interest on that premium for as long as the corresponding balance remains outstanding. A $33,400 premium therefore costs more than $33,400 over time unless it is repaid immediately.

This is why comparing an insured purchase with a conventional purchase should not stop at the premium percentage. The comparison should include the larger mortgage, the payment, interest on the premium and the opportunity cost of the extra down payment required to avoid high-ratio insurance.

Mortgage insurance can improve a lender’s funding/risk economics, so insured or insurable products may sometimes carry attractive rates. But the borrower-paid premium is a real cost. A modest rate advantage may or may not recover that premium over the period the borrower actually keeps the mortgage.

The correct comparison is time-dependent. If the mortgage is likely to be sold or refinanced in three years, compare the interest and balance over three years. If the borrower expects to keep the structure for a full term or longer, model that horizon instead. One headline rate cannot answer the question.

Specialty insurance programs can have different premium schedules. Borrowed-down-payment, self-employed, second-home, rental and refinance products are examples where public insurer premiums can differ from the standard homeowner table. Some products also use top-up premium calculations when an existing insured mortgage is increased or ported.

That is why the standard 4.00% high-ratio rate should never be treated as a universal insurance charge. First identify the insurance product, then use that product’s current premium schedule.

CMHC’s current portability schedule provides example premium credits of 100% within 6 months, 50% within 12 months and 25% within 24 months, subject to the portability rules and the new insurance calculation. Sagen publishes a similar credit schedule.

The credit is not a cash refund of the old premium. It is a mechanism that may reduce the premium payable on a new insured mortgage when the borrower and transaction meet the insurer’s portability requirements.

Insurers may offer incentives tied to defined objectives, such as energy efficiency. Those programs should be evaluated under their current eligibility rules. They do not change the general principle that a standard mortgage-insurance premium is not automatically refunded because the borrower’s LTV later falls.

Keep premium refund programs, portability credits and ordinary equity growth separate. They are three different concepts.

A smaller down payment preserves cash but increases mortgage debt and usually creates a borrower-paid premium. A larger down payment reduces debt and may eliminate that premium, but it ties more household capital into the property. Neither outcome is automatically superior.

Compare at least five outputs: cash required at closing, mortgage balance after the premium, monthly payment, remaining emergency reserves and projected mortgage balance at the expected exit/renewal date. That turns “How do I avoid CMHC?” into the more useful question: Which use of my available cash produces the stronger overall position?

The CMHC Insurance Calculator can estimate the premium for a purchase scenario. Then use the Mortgage Payment Calculator to compare the payment after capitalizing the premium, and Insured Mortgage Amortization to compare 25 versus 30 years.