Mortgage Insurance Explained: CMHC, Sagen, and Canada Guaranty in 2025
Introduction
Buying a home with less than 20% down payment? You're not alone—and you'll need mortgage default insurance to make it happen. For Vancouver homebuyers navigating one of Canada's most expensive real estate markets, understanding mortgage insurance isn't just helpful—it's essential to your homeownership journey.
Mortgage default insurance protects lenders if borrowers stop making payments, but here's the benefit for you: it allows Canadians to purchase homes with as little as 5% down. In a city where the average detached home exceeds $1.5 million, this insurance opens doors that would otherwise remain firmly closed.
In this comprehensive guide, I'll walk you through Canada's three mortgage insurers—CMHC, Sagen, and Canada Guaranty—explaining how they work, what they cost, and the significant 2025 rule changes that could save you tens of thousands of dollars. Whether you're a first-time buyer in Burnaby or a newcomer settling in Richmond, this information will help you make informed decisions about your mortgage.
Table of Contents
Listen to the podcast about Vancouver's 2025 new mortgage rules here.
What Is Mortgage Default Insurance?
Mortgage default insurance—often called CMHC insurance regardless of which provider issues it—is mandatory in Canada when your down payment is less than 20% of the purchase price. This insurance protects the lender, not you, against potential losses if you default on your mortgage payments.
Why Does Mortgage Insurance Exist?
Canadian law requires it. The Bank Act, Trust and Loan Companies Act, and Insurance Companies Act all limit financial institutions from lending more than 80% of a property's value unless that additional portion is insured against default. Without this insurance, you'd need a full 20% down payment to purchase any home—a significant barrier in Metro Vancouver's competitive market.
The Hidden Benefit for Buyers
While you pay the premium, mortgage insurance actually works in your favour in several important ways. Insured mortgages typically qualify for lower interest rates than uninsured mortgages because lenders face reduced risk. Additionally, you can enter the housing market years earlier than if you had to save a 20% down payment. For a $1 million Vancouver home, that's the difference between saving $50,000 versus $200,000.
Who Provides Mortgage Insurance in Canada?
Three providers share Canada's mortgage insurance market. CMHC (Canada Mortgage and Housing Corporation) is the government-backed Crown corporation and the most recognized name. Sagen, formerly Genworth Financial, operates as Canada's largest private mortgage insurer and is owned by Brookfield Business Partners. Canada Guaranty, established in 2010, is the only 100% Canadian-owned private insurer, backed by the Ontario Teachers' Pension Plan.
Your lender typically determines which insurer handles your mortgage during the underwriting process—you don't choose directly. However, all three insurers charge identical premium rates and follow the same eligibility requirements, so your costs remain consistent regardless of which insurer your lender uses.
Canada's Three Mortgage Insurers Compared
Understanding each insurer helps you appreciate the stability and security behind your mortgage. All three are financially strong and regulated by the Office of the Superintendent of Financial Institutions (OSFI), ensuring consistent standards across the industry.
CMHC: The Government-Backed Leader
CMHC has been helping Canadians achieve homeownership since 1946. As a Crown corporation, it operates with an explicit government guarantee, making it the most secure option from a lender's perspective. CMHC insures approximately 40% of Canada's mortgage insurance market and sets many of the standards that private insurers follow.
CMHC offers several notable programs for Vancouver buyers. Their Eco Plus program provides up to 25% premium refunds for energy-efficient homes. They also offer specialized programs for newcomers to Canada—particularly relevant for Vancouver's diverse population—and self-employed borrowers who may have non-traditional income documentation.
Sagen: Canada's Largest Private Insurer
Sagen, Canada's largest private mortgage insurer, has operated for over 35 years (previously as Genworth Financial). Owned by Brookfield Business Partners, Sagen maintains a strong capital position with a MICAT ratio of 191%—well above OSFI's 150% minimum requirement.
Sagen's Purchase Plus Improvements program appeals to Vancouver buyers considering fixer-uppers in established neighbourhoods. This program allows you to include renovation costs in your mortgage, combining purchase and improvement financing into a single, insured transaction. Their New to Canada program also provides flexible documentation requirements for newcomers establishing themselves in BC.
Canada Guaranty: 100% Canadian-Owned
Established in 2010, Canada Guaranty represents the only fully Canadian-owned private mortgage insurer. Backed by the Ontario Teachers' Pension Plan, one of Canada's largest and most stable pension funds, Canada Guaranty has insured over 350,000 Canadians representing $68 billion in residential mortgage volume.
Their Energy-Efficient Advantage program offers up to 25% premium discounts for qualifying energy-efficient homes or renovations. For environmentally conscious Vancouver buyers investing in green features, this program can translate into significant savings on your mortgage insurance costs.
Premium Rates and How They're Calculated
Mortgage insurance premiums are calculated as a percentage of your mortgage amount, with rates determined by your loan-to-value (LTV) ratio. All three insurers charge identical rates, set by federal regulation.
Current Premium Rate Schedule
The premium structure applies universally across CMHC, Sagen, and Canada Guaranty:
Loan-to-Value Ratio Premium Rate Up to 65% 0.60% 65.01% to 75% 1.70% 75.01% to 80% 2.40% 80.01% to 85% 2.80% 85.01% to 90% 3.10% 90.01% to 95% 4.00% 90.01% to 95% (non-traditional down payment) 4.50%
An additional 0.20% premium surcharge applies if you qualify for a 30-year amortization (available to first-time buyers and purchasers of new construction).
Real-World Vancouver Example
Let's calculate the mortgage insurance premium for a typical Vancouver purchase:
Scenario: Purchasing a $900,000 condo in Burnaby with 10% down payment ($90,000)
Mortgage amount: $810,000
Loan-to-value: 90% (falls in the 85.01% to 90% bracket)
Premium rate: 3.10%
Insurance premium: $810,000 × 3.10% = $25,110
This premium gets added to your mortgage principal, meaning your total mortgage becomes $835,110. You'll pay this off over your amortization period rather than upfront—though you can choose to pay cash at closing if you prefer.
Provincial Sales Tax Considerations
In British Columbia, mortgage insurance premiums are not subject to provincial sales tax. However, buyers in Ontario, Quebec, Manitoba, and Saskatchewan must pay their respective provincial taxes on the premium amount—and this tax cannot be added to the mortgage, requiring payment at closing.
2025 Mortgage Insurance Changes: What You Need to Know
The federal government implemented significant mortgage reforms effective December 15, 2024, representing the most substantial changes in over a decade. These reforms directly benefit Vancouver homebuyers facing elevated property prices.
Increased Price Cap: $1.5 Million
The insured mortgage price cap increased from $1 million to $1.5 million—the first adjustment since 2012. This change recognizes that home prices in markets like Vancouver have far exceeded the previous threshold.
What this means for you: Previously, purchasing a $1.2 million townhouse in North Vancouver required a minimum 20% down payment ($240,000). Now, you can purchase that same property with an insured mortgage, requiring just $95,000 down (5% on the first $500,000, plus 10% on the remaining $700,000).
The down payment structure for homes under $1.5 million follows this formula:
5% on the portion of the purchase price up to $500,000
10% on the portion between $500,000 and $1.5 million
30-Year Amortization for First-Time Buyers
All first-time homebuyers now have access to 30-year amortization periods on insured mortgages. Previously, insured mortgages were capped at 25-year amortizations.
Impact on monthly payments: Extending from 25 to 30 years can reduce monthly payments by approximately 10%—equivalent to roughly a 0.90% reduction in your interest rate. For a $700,000 mortgage at 4.5%, monthly payments drop from approximately $3,875 to $3,545, saving $330 per month.
A 0.20% premium surcharge applies to 30-year amortizations, but the monthly payment reduction typically far outweighs this additional cost.
30-Year Amortization for New Construction
Buyers purchasing newly constructed homes—including new-build condos—also qualify for 30-year amortizations, regardless of whether they're first-time buyers. This policy incentivizes new construction to address housing supply shortages across BC and Canada.
Stress Test Exemption for Renewals
Insured mortgage holders switching lenders at renewal no longer face the stress test requirement. This increases competition among lenders at renewal time, potentially securing you better rates without the hurdle of requalifying at artificially elevated rates.
FAQs
How much does mortgage insurance cost in Vancouver?
Mortgage insurance premiums range from 0.60% to 4.50% of your mortgage amount, depending on your down payment size. For the most common scenario—a 5% down payment—the premium is 4.00%. On a $500,000 mortgage, this equals $20,000 added to your principal. Premium rates are identical across CMHC, Sagen, and Canada Guaranty, and British Columbia does not charge provincial sales tax on mortgage insurance premiums, unlike Ontario and Quebec.
Can I avoid paying mortgage insurance?
You can avoid mortgage insurance by making a down payment of 20% or more. However, this isn't always the smartest financial decision. Insured mortgages often qualify for lower interest rates than uninsured mortgages because lenders face less risk. Additionally, waiting to save 20% in Vancouver's market could mean watching prices increase while you save. Run the numbers with a mortgage professional to determine which approach makes sense for your situation.
What's the minimum credit score for mortgage insurance approval?
All three mortgage insurers—CMHC, Sagen, and Canada Guaranty—require a minimum credit score of 680 for at least one borrower on the application. This requirement also applies to guarantors co-signing the mortgage. For newcomers to Canada without established credit history, insurers may consider alternative documentation to assess creditworthiness, such as international credit reports or rental payment history.
Is mortgage insurance transferable if I sell and buy a new home?
Yes, mortgage insurance is portable under certain conditions. If you sell your current home and purchase a new one within a specified timeframe (typically 6 months to 2 years depending on the insurer), you can transfer your existing mortgage insurance to the new property. This portability feature can save you from paying another full premium, though premium credits decrease over time. You'll need to meet current qualification requirements, and your new mortgage amount cannot exceed your original insured amount.
What happens to my mortgage insurance if I pay down my mortgage below 80% LTV?
Your mortgage insurance premium is a one-time cost calculated at the time of purchase and added to your principal. Even if you pay down your mortgage to below 80% loan-to-value, you won't receive a refund of the insurance premium—it's been fully earned by the insurer. However, when you renew or refinance, you won't pay additional insurance premiums since your LTV will be below the insurance threshold.
Conclusion
Mortgage default insurance opens the door to homeownership for Canadians who haven't saved a 20% down payment—and with Vancouver's elevated home prices, that describes most first-time buyers in our market. Whether your mortgage is insured through CMHC, Sagen, or Canada Guaranty, you'll pay identical premiums while gaining access to competitive interest rates and the ability to enter the market years earlier than otherwise possible.
The December 2024 reforms represent genuine opportunities for Vancouver buyers. The increased $1.5 million price cap means detached homes and larger townhouses throughout the Lower Mainland now qualify for insured mortgages with lower down payment requirements. Extended 30-year amortizations reduce monthly payment burdens by approximately 10%, making homeownership more manageable from day one.
Understanding how mortgage insurance works—and the recent changes affecting your purchasing power—puts you in a stronger position as a buyer. But every situation is unique. Your income, credit profile, property type, and long-term goals all influence which mortgage structure works best for you.
Ready to explore your options? I specialize in helping Vancouver buyers navigate mortgage insurance, pre-approvals, and everything in between. Let's discuss your situation and find the path to homeownership that fits your life.
Need help with your Vancouver mortgage? Call Bill Karalash at 604-265-5858 or schedule a free consultation.
About the Author
Bill Karalash is a licensed Sub-Mortgage Broker (License #MB610235) operating under Breezeful Brokerage (License #MB601942) in British Columbia. Serving the Greater Vancouver area and all of BC, Bill specializes in 24-48 hour pre-approvals and works with first-time buyers, self-employed professionals, and newcomers to Canada. Get pre-approved today →
External Sources
CMHC Mortgage Loan Insurance Cost - Official CMHC premium rates and program details
Government of Canada: Boldest Mortgage Reforms in Decades - Federal announcement on December 2024 changes
OSFI Real Estate Secured Lending - Regulatory framework for mortgage insurance
Sagen Premium Rates Chart - Official Sagen premium information
Canada Guaranty Official Site - Program details and energy-efficient discounts
