Overview
When financing a home in Canada, understanding the difference between insured and uninsured mortgages is crucial. These categories impact your minimum down payment, qualifying criteria, interest rates, and eligibility for certain properties.
Key Differences: Insured vs. Uninsured Mortgages
| Feature | Insured Mortgage | Uninsured Mortgage |
|---|
| Down Payment | Less than 20% | 20% or greater |
| Insurance Requirement | Mandatory mortgage default insurance | No mortgage default insurance |
| Insurance Premium | Paid by borrower (added to mortgage) | None |
| Interest Rates | Lower, best advertised rates | Typically higher |
| Property Price Limit | Up to $1.5 million (as of Dec 15, 2024) | No formal cap, but over $1.5 million only uninsured |
| Amortization | Max 25 years (30 years for first-time buyers/new builds as of Dec 15, 2024) | Up to 30 years |
| Property Use | Must be owner-occupied | Owner-occupied, rental, or investment properties |
| Borrower Profile | Often first-time buyers or those with smaller down payments | Buyers with substantial down payment or investors |
| Lender Risk | Reduced (insurance covers default) | Higher (no insurance coverage) |
Insured Mortgages
- Definition: A mortgage where the borrower pays less than 20% down and must obtain mortgage default insurance through CMHC, Sagen, or Canada Guaranty.
- Purpose: Allows buyers to purchase with as little as 5% down.
- Eligibility: As of December 15, 2024, the home price must be under $1.5 million, and amortization typically maxes at 25 years (or 30 years for first-time buyers/new construction).
- Interest Rates: Lower, since the lender’s risk is covered by insurance.
- Premiums: The insurance premium is added to your mortgage. The lower your down payment, the higher the premium.
Uninsured Mortgages
- Definition: Requires a minimum 20% down payment. The mortgage is not covered by default insurance, so the borrower bears more risk.
- Use Cases: Common for:
- Properties over $1.5 million
- Rental or investment properties
- Amortizations up to 30 years
- Interest Rates: Slightly higher than insured rates, as there is greater risk to the lender.
- No Premiums: No default insurance means no extra premiums added to the mortgage.
Insurable Mortgages (Related Category)
- Definition: Mortgages with 20% or more down that meet certain criteria (property price, amortization, etc.) and can be insured by the lender for lower rates, though rates are not as low as fully insured mortgages.
- Eligibility: Purchase price under $1 million (for most lenders), max 25-year amortization, owner-occupied or immediate family occupancy.
Recent Mortgage Rule Changes (Effective December 15, 2024)
- Max Purchase Price for Insured Mortgages: Raised to $1.5 million.
- Max Amortization: 30 years now available for all first-time home buyers and new construction purchases, regardless of insurance status.
Summary Table
| Criteria | Insured | Uninsured |
|---|
| Down Payment | < 20% | ≥ 20% |
| Default Insurance | Required | Not required |
| Interest Rate | Lower | Higher |
| Max Property Price | $1.5 million | No cap (but over $1.5M only uninsured) |
| Max Amortization | 25 years (30 for FTHB/new build) | 30 years |
| Property Type | Owner-occupied only | Owner-occupied or investment/rental |
| Insurance Premium | Yes, added to mortgage | No |
Next Steps & Recommendations
- Compare Rates: Insured mortgages offer lower rates but come with extra insurance costs. If you have at least 20% down, compare uninsured and insurable options.
- Consider Property Type: If buying over $1.5 million, or an investment property, you’ll need an uninsured mortgage.
- Amortization Needs: If you want a longer amortization (up to 30 years), uninsured options may be necessary unless you’re a first-time homebuyer or buying new construction under the latest rules.
- Get Personalized Advice: Use a comprehensive rate comparison platform like theratefinder to match your situation with the most competitive rates and terms available from top Canadian lenders. Start your application at theratefinder.ca/onboarding for a tailored mortgage solution.
Tip: Always weigh the cost of insurance premiums against the benefit of lower rates, and consider how your property type and purchase price affect your options. If you’re unsure about which mortgage type best fits your needs, speaking with a mortgage expert or using a platform like theratefinder can help you navigate the latest market changes and product offerings.