Definition
An insured mortgage is a loan with a loan-to-value ratio (LTV) exceeding 80% — that is, with a down payment below 20%. In Canada, this type of loan must be covered by mortgage default insurance from CMHC, Sagen, or Canada Guaranty.
The insurance protects the lender (not the borrower) against loss following default and foreclosure. The premium ranges from 2.80% to 4.50% of the loan amount depending on LTV (2.80% at 80.01-85%, 4.00% at 90.01-95%). In Québec, the premium is subject to QST at 9.975% and paid in cash at origination (other provinces capitalize the premium to the balance).
An insured mortgage accesses the best market rates (often 10-20 bps below equivalent conventional) because the lender bears no risk. Purchase price cap since December 15, 2024: CA$1.5M. Maximum amortization: 25 years (30 years for first-time buyers or new builds under new federal rules).