Under 20% down: how the mortgage insurance premium is calculated — plus the new 30-year amortization option and $1.5M insured price cap

Why you pay extra under 20% down, and who it actually protects

Under 20% down, your mortgage requires default insurance — the business page mentions this. This insurance protects the lender, not you: it covers the lender if you can't repay, not your home.

Three organizations provide this insurance in Canada: CMHC (a federal Crown corporation), Sagen, and Canada Guaranty. Rules and rates are essentially aligned across all three, and the lender decides which one to use — you don't need to shop between them yourself.

At 20% down or more, you skip this premium entirely, but as the business page also notes, underwriting can sometimes be stricter, since there's no insurer backing the lender.

How the premium is actually calculated — based on the loan amount, not the purchase price

The premium is a percentage of your loan amount (not the purchase price), and the percentage depends on your down payment tier: 5–9.99% down is roughly 4.00%; 10–14.99% down is roughly 3.10%; 15–19.99% down is roughly 2.80%. A larger down payment actually means a lower rate.

A worked example (illustrative only — confirm the actual quote with your lender): a $700,000 purchase with 10% down ($70,000) leaves a $630,000 loan, which falls in the 10–14.99% tier. The premium works out to roughly $630,000 × 3.10% ≈ $19,530.

This isn't extra cash you need on hand — it's typically added directly to your mortgage principal and spread across your monthly payments going forward, not an extra amount due at closing.

30-year amortization: a new option since late 2024, and it now covers a lot of buyers

Insured mortgages used to cap out at 25-year amortization. Starting mid-December 2024, that loosened: first-time buyers can choose 30 years regardless of whether they're buying new or resale, and anyone buying a newly-constructed home can choose 30 years regardless of whether they're a first-time buyer. If you're a first-time buyer, this option is available to you no matter which type of home you buy.

A 30-year amortization lowers your monthly payment compared to 25 years, but stretches out the repayment period, which increases total interest paid. It's a trade — a lower monthly payment for a longer repayment period and more interest overall — worth running the numbers on rather than assuming longer is automatically better.

Choosing 30-year amortization adds 20 basis points to your premium rate. Continuing the example above: 3.10% becomes 3.30%, so the premium works out to roughly $630,000 × 3.30% ≈ $20,790 — and that extra amount is also added to principal, not paid as separate cash.

Insured mortgages also have a price cap, and it comes up a lot in Metro Vancouver

Insured mortgages only apply to homes priced under $1.5 million — this cap was raised from $1 million in December 2024. Above that price, no matter how much you put down, you can't use an insured mortgage, and your down payment requirement jumps to 20%.

Home prices in Metro Vancouver run high, especially for detached houses, so this line comes up often. Before you start touring homes, check whether the one you're interested in falls under $1.5 million — it meaningfully changes how much down payment you need to have ready, not a minor detail.

Putting it all together — what this actually means for you

Down payment, premium, and amortization are all connected: a smaller down payment means a higher premium rate; a longer amortization lowers the monthly payment but raises total interest; and once the purchase price crosses $1.5 million, you're out of insured-mortgage territory entirely and the down payment requirement becomes 20%.

Read together with the previous article on saving your down payment, these two cover the full sequence: how to save the down payment and what tax breaks apply (previous article), then how the premium is calculated, whether 30-year amortization makes sense, and whether the $1.5 million cap affects you (this one).

Tell me your target purchase price and how much you're planning to put down, and I can run the actual numbers at current rates for you, including what the monthly payment difference looks like between a 25-year and 30-year amortization.

Common questions

Do I need to pay the insurance premium in cash separately?

No — it's typically added directly to your mortgage principal and spread across your monthly payments going forward, not an extra amount due at closing.

Can anyone choose the 30-year amortization?

Currently it's available to first-time buyers (buying new or resale) and to anyone buying a newly-constructed home (first-time buyer or not). Repeat buyers purchasing resale homes outside those categories are still capped at 25 years.

Besides the extra 20 basis points, what else should I know about choosing 30-year amortization?

Your monthly payment goes down, but the longer repayment period means more total interest over the life of the loan. It's a genuine trade-off worth running the numbers on — a longer amortization isn't automatically the better choice.

Home prices in Metro Vancouver aren't cheap — will the $1.5 million cap come up often?

Yes, especially for detached houses. Check whether the home you're interested in falls under $1.5 million before you get too far in — crossing that line means no insured mortgage regardless of your down payment, and your requirement jumps to 20%, which meaningfully changes how much you need saved.

Can I choose which of CMHC, Sagen, or Canada Guaranty insures my mortgage?

That's normally the lender's decision, not yours — rates and rules are essentially aligned across all three, so it won't make a meaningful difference which one is used. You don't need to compare them yourself; the lender handles this step.

About the author: I'm Morning Lee, a licensed mortgage broker with Dominion Lending Centres - A Better Way and a licensed REALTOR® with Royal Pacific Realty (Kingsway) Ltd., in British Columbia. I started my first business while still in university, and have run several since — computer parts, moving, logistics, and more — before moving into real estate and mortgages. Over thirty years, it's all been variations on the same thing. The read above comes from that same experience. I work in English and Mandarin; happy to talk through your situation.