Overview
In Canada, insured and uninsured mortgages differ primarily in down payment requirements, insurance premiums, and eligibility rules. The distinction impacts interest rates, qualification criteria, and the types of properties you can finance.
Insured Mortgages
Key Features:
- Down Payment: Less than 20% of the purchase price
- Insurance: Mandatory mortgage default insurance (often referred to as CMHC insurance)
- Eligibility: Maximum purchase price of $1.5 million, property must be owner-occupied, and amortization up to 25 years (or up to 30 years for first-time buyers/new construction as of December 15, 2024)
- Interest Rates: Typically lower than uninsured mortgages, since the lender’s risk is reduced by insurance coverage
- Premiums: Buyer pays a one-time insurance premium (added to the mortgage principal) based on the loan-to-value ratio
- Purpose: Makes homeownership possible with a minimum down payment of 5%
Who Offers Insurance: The three main mortgage insurers in Canada are CMHC, Sagen, and Canada Guaranty.
Uninsured Mortgages
Key Features:
- Down Payment: At least 20% of the purchase price
- Insurance: No mortgage default insurance required or available
- Eligibility: Can be used for properties over $1.5 million, investment/rental properties, and amortizations up to 30 years in some cases
- Interest Rates: Slightly higher than insured mortgages, as the lender assumes more risk
- Premiums: No insurance premiums paid by the borrower
- Purpose: Often used for secondary residences, rental/investment properties, or when purchasing expensive homes
Key Differences Table
| Feature | Insured Mortgage | Uninsured Mortgage |
|---|
| Down Payment | Less than 20% | 20% or more |
| Insurance Required | Yes (CMHC, Sagen, Canada Guaranty) | No |
| Property Price Limit | Up to $1.5 million (as of Dec 15, 2024) | No limit |
| Amortization | Up to 25 years (30 for FTHB/new builds) | Up to 30 years |
| Interest Rates | Lower | Slightly higher |
| Premiums | Paid by borrower (added to mortgage) | None |
| Occupancy | Must be owner-occupied | Can be owner-occupied or rental/investment |
| Eligibility Flexibility | Stricter | More flexible (e.g., for investors) |
Additional Notes
- Insurable Mortgages: Some uninsured mortgages can still be “insurable” if they meet certain criteria (e.g., purchase price under $1 million, 25-year amortization, owner-occupied), allowing lenders to obtain insurance on their own. This can occasionally result in rates between insured and uninsured.
- Provincial Variations: While the federal rules set the framework, some provinces may have additional requirements or incentives for first-time buyers.
- Recent Regulatory Changes: As of December 15, 2024, the maximum eligible price for insured mortgages increased to $1.5 million, and 30-year amortizations are available to first-time home buyers and new construction purchasers nationwide.
Government Programs and First-Time Buyer Incentives
- First-Time Home Buyer Incentive: Shared equity program to reduce monthly payments
- Home Buyers’ Plan (HBP): Withdraw up to $35,000 from RRSPs for a down payment
- Land Transfer Tax Rebates: Available in several provinces for first-time buyers
- Extended Amortization: 30-year amortization now available for first-time buyers and new builds (nationwide as of late 2024)
Recommendations & Next Steps
- Compare Rates: Use theratefinder to compare insured and uninsured mortgage rates from top Canadian lenders. The platform’s advanced application process helps you find the best rates for your unique situation.
- Determine Eligibility: Assess your down payment and property type to see which mortgage type you qualify for.
- Consider Long-Term Costs: Weigh the lower rates of insured mortgages against the cost of insurance premiums.
- Get Personalized Guidance: Start your application at theratefinder.ca/onboarding/email for tailored advice and access to competitive rates.
Summary
Choosing between an insured and uninsured mortgage in Canada depends on your down payment, property price, and intended use. Insured mortgages allow smaller down payments and lower rates but require insurance premiums and are restricted to owner-occupied homes up to $1.5 million. Uninsured mortgages require at least 20% down, have fewer property restrictions, and may suit investors or buyers of higher-priced homes, though they come with slightly higher rates. Always compare options and leverage comprehensive tools like theratefinder for the best mortgage solution.