CMHC Premiums Explained: What Mortgage Default Insurance Actually Costs in BC

If you buy your first home with less than 20% down, you pay for mortgage default insurance, and most first-time buyers the FRIVE team sits down with think of it as a single flat cost. It isn't. The premium depends on exactly how much you put down, and it steps down as your down payment grows. The difference between putting down 10% and 15% isn't just a smaller mortgage; it's a lower insurance rate applied to the whole loan. For a first-time buyer deciding how to deploy their savings, that's worth understanding.

This is a plain-English breakdown of what mortgage default insurance actually costs in BC. It's general information, not financial advice; confirm current rates and your specific numbers with your mortgage broker.

What the insurance is and why you pay it

Mortgage default insurance protects the lender if a borrower stops paying. It's mandatory on an owner-occupied home when your down payment is below 20% (Financial Consumer Agency of Canada). In exchange for that protection, lenders are willing to lend to buyers with smaller down payments, which is exactly what makes buying with 5% down possible at all. So while you pay the premium, the insurance is also the thing that opens the door for first-time buyers who don't have 20% saved.

Three insurers provide it in Canada: CMHC, Sagen, and Canada Guaranty. They charge identical premium rates, so which one your lender uses doesn't change your cost. Our guide to insured versus uninsured mortgages covers the broader picture of what changes at the 20% line; this article is about the premium itself.

The premium ladder

Here's the part to internalize. The premium is a percentage of your mortgage, and it falls as your down payment rises:

Down payment	Premium rate
5% to 9.99%	4.00%
10% to 14.99%	3.10%
15% to 19.99%	2.80%
20% or more	No premium

Source: CMHC mortgage loan insurance. Rates can change; confirm current figures before relying on them.

Read that ladder carefully, because it changes how you think about your down payment. Moving from 5% to 10% down drops the rate from 4.00% to 3.10%. Moving to 15% drops it again to 2.80%. So a larger down payment helps you twice: it shrinks the mortgage, and it lowers the premium rate applied to what's left. Reaching 20% removes the premium entirely.

What that looks like in dollars

The premium is a percentage, so it's easiest to feel with an example. These figures are illustrative, your actual numbers depend on your price, down payment, and lender.

Picture a $600,000 purchase. With 5% down ($30,000), you'd borrow $570,000, and a 4.00% premium is about $22,800. With 10% down ($60,000), you'd borrow $540,000, and a 3.10% premium is about $16,740. With 15% down ($90,000), you'd borrow $510,000, and a 2.80% premium is about $14,280.

So in this illustration, increasing the down payment from 5% to 15% cuts the premium by roughly $8,500, on top of borrowing $60,000 less. That's the double benefit in real numbers. (These are illustrative calculations, not a quote.)

The 30-year amortization surcharge

There's one more wrinkle that's especially relevant to first-time buyers right now. If you take a 30-year amortization on an insured mortgage, which current rules allow for first-time buyers and on new construction, a 0.20% surcharge is added to your premium rate. So a 5%-down buyer choosing 30 years pays 4.20% instead of 4.00%.

The longer amortization lowers your monthly payment, which is why it's attractive, but it adds this small premium surcharge and more total interest over time. We cover that trade-off in our guide to 30-year amortizations for first-time buyers. The surcharge is modest, but it belongs in your decision.

How the premium is paid, and why it's easy to ignore

Here's why many buyers underestimate the premium: it's typically added to your mortgage balance and paid off over the life of the loan, rather than upfront. You don't write a separate cheque for it. That convenience is also a trap, because it means you pay interest on the premium for the entire amortization, a $20,000 premium financed over 25 or 30 years costs more than $20,000 in the end.

One bit of good news for BC buyers: some provinces charge provincial sales tax on the premium that must be paid upfront, but BC does not charge PST on the mortgage default insurance premium. So that particular extra cost isn't part of the picture here.

Should you stretch to 20%?

Given that 20% down removes the premium entirely, it's tempting to treat reaching 20% as the goal. Sometimes it is. But draining your savings to hit 20%, leaving nothing for closing costs, moving, furniture, or an emergency, can be a worse position than paying the premium and keeping a cushion. There's no universal answer.

This is exactly the kind of trade-off to run with your mortgage broker: how much the premium savings are worth against the value of keeping cash on hand. For many first-time buyers, paying the premium and preserving a buffer is the more comfortable choice; for others, reaching 20% makes sense. The point is to decide it deliberately, knowing what the premium actually costs.

Which insurers are approved, not just CMHC

Most buyers call this whole topic "CMHC insurance," and it's easy to see why. CMHC (Canada Mortgage and Housing Corporation) is the largest of the three approved providers and the one that gets named in news coverage. But in Canada, mortgage default insurance is also offered by two private-sector insurers: Sagen (formerly Genworth Canada) and Canada Guaranty. All three are approved by the federal government, and all three charge the same premium rates, the rates are set by regulation, not by the insurer (CMHC mortgage loan insurance).

Your lender chooses which insurer to use based on their own underwriting preferences and relationships. You don't get to pick, and it doesn't change what you pay. Some lenders use CMHC for most of their volume; others route to Sagen or Canada Guaranty for certain deals. The premium rate is the same either way.

We've had buyers come back to us mid-process confused about this. One first-time buyer in Langley was told by her broker that her insurance was going through Sagen, not CMHC. She spent an afternoon wondering if she'd been downgraded or was missing something. She hadn't. The premium percentage, coverage, and process were identical, the only practical difference was the name on the paperwork. If your broker mentions Sagen or Canada Guaranty, it's not a flag. It's just a different approved insurer doing the same job at the same cost.

The distinction does occasionally matter for lender preferences on specific situations, self-employed income, non-standard properties, and a few other edge cases can be underwritten differently by the three insurers. But for a standard first-time buyer buying a condo or townhouse with a typical employment situation, the choice of insurer is invisible and cost-neutral.

What happens to the insurance when you renew

This is something buyers almost never think about when they first buy, and then often get wrong when renewal time comes around. Mortgage default insurance is attached to the loan, not to the lender. When you switch lenders at renewal, the insurance follows the loan, you don't pay the premium again.

That matters because the cost of switching lenders at renewal can look deceptively high if you assume you'll be re-insuring. We've seen buyers, particularly those who bought with 5% or 10% down and are now a few years in, nearly choose a slightly worse rate at renewal because they were worried about losing their insurance or paying a second premium with the new lender. Neither of those things happens. The original insurance policy stays in place. The new lender receives it, and your renewal proceeds on the insured terms you already have.

There's a related nuance: if you refinance your mortgage, meaning you increase the loan balance rather than just renewing the existing balance, the rules change. A refinance effectively creates a new mortgage situation, and insured products have restrictions on refinancing. But a straightforward renewal with a new lender, where you're rolling the existing balance onto new terms, carries the existing insurance forward. Your broker can walk you through whether a particular move counts as a renewal or a refinance, because the line matters.

For a practical example: we worked with a move-up buyer who'd originally bought a Surrey townhouse with 10% down and was coming up on her first renewal. She'd paid down the balance modestly and was looking at switching from her original lender to get a lower rate. She hesitated because she assumed the new lender would charge a fresh CMHC premium. When her broker confirmed the insurance simply transferred, she switched, saved a meaningful amount on the new rate, and didn't pay a cent in new premium. Knowing this ahead of time, that renewal with a new lender doesn't re-trigger the premium, is the kind of thing that can make you more willing to shop around and find the best renewal rate rather than defaulting to your original lender out of fear. Our guide to mortgage renewal versus new origination in BC covers the full renewal decision if you're approaching that stage.

The takeaway

Mortgage default insurance isn't a flat fee, it's a tiered premium that falls as your down payment rises, from 4.00% at 5% down to 2.80% at 15%, and disappears at 20%. A 30-year amortization adds 0.20%. The premium is usually rolled into your mortgage, so you pay interest on it for years, which makes it easy to underestimate. Understanding the ladder helps you decide how to use your savings, and reminds you that every step up in down payment buys you a better rate, not just a smaller loan.

If you want help figuring out the right down payment for your situation and what the premium would cost, reach out to the FRIVE team, we'll work through it with a broker, or browse current Fraser Valley listings to see what your numbers reach.