Buying a home with a low down payment is common in Canada, especially for first-time buyers. However, many buyers are confused when they hear terms like security insurance, insured mortgage, or CMHC insurance.
This blog explains what security insurance is, why it exists, how much it costs, and when it makes sense, in simple terms.
What Is Security Insurance?
Security insurance—formally called mortgage default insurance—is required in Canada when a buyer puts less than 20% down payment on a home.
Its purpose is simple:
👉 It protects the lender, not the buyer, if the borrower stops making mortgage payments.
This insurance allows banks and lenders to approve mortgages with as little as 5% down, while reducing their financial risk.
Who Provides Security Insurance in Canada?
There are three approved mortgage insurance providers in Canada:
CMHC (Canada Mortgage and Housing Corporation – government-backed)
Sagen
Canada Guaranty
From a buyer’s perspective, there is no practical difference between them. Your lender selects the insurer.
When Is Security Insurance Required?
Security insurance is required when:
Your down payment is between 5% and 19.99%
It is not required when:
Your down payment is 20% or more
This is why mortgages are often categorized as:
Insured mortgages → under 20% down
Uninsured mortgages → 20% or more down
Why Does Canada Require This Insurance?
Canada’s mortgage system is designed to:
Keep lending stable
Reduce bank failures
Allow buyers to enter the market earlier
Because lenders are protected, they are willing to:
Offer lower interest rates
Approve buyers with smaller down payments
Extend longer amortizations (within rules)
How Much Does Security Insurance Cost?
The cost depends on how small your down payment is.
The lower the down payment, the higher the insurance premium.
| Down Payment | Approx. Insurance Cost |
|---|---|
| 5% | ~4.0% of mortgage |
| 10% | ~3.1% |
| 15% | ~2.8% |
| 20%+ | 0% |
Important Details Buyers Should Know:
The premium is usually added to the mortgage
You pay interest on it over time
In Ontario, provincial sales tax applies (paid upfront)
Example: How This Looks in Real Life
Let’s say you buy a home for $700,000.
Down payment (5%): $35,000
Mortgage amount: $665,000
Insurance (approx. 4%): $26,600
Total mortgage after insurance: ~$691,600
This means you’re borrowing more—but you were able to buy years earlier than waiting to save 20%.
Why Many Buyers Still Choose Low Down Payment
Despite the cost, many buyers still use security insurance because:
Home prices may rise faster than savings
Monthly payments are still affordable
It allows buyers to stop paying rent sooner
Insured mortgages often have better interest rates
For many buyers, the cost of insurance is less than the cost of waiting.
Downsides Buyers Should Understand
Security insurance is not free money. Buyers should be aware that:
It increases total debt
It is non-refundable
It does not protect the buyer
It may limit refinancing options later
This is why planning matters.
Is Security Insurance Worth It?
There is no universal answer.
It makes sense if:
You plan to stay in the home long-term
Monthly payments fit comfortably
You want to enter the market sooner
It may not make sense if:
You can reach 20% down soon
You plan to sell in the short term
Cash flow is tight
Final Thought
Security insurance is not a penalty—it’s a financial tool.
Used correctly, it helps buyers build equity sooner instead of waiting on the sidelines.
The key is understanding when it works in your favor and when it doesn’t.
