In short
Below 20% down, mortgage default insurance is mandatory and its premium is added to the loan. On a $500,000 home, putting 5% down ($25,000) triggers a 4% premium, i.e. $19,000: financed over 25 years at 5%, it ends up costing about $33,300 — plus, in Quebec, Ontario and Saskatchewan, a sales tax on the premium due in cash at closing ($1,895 in Quebec). It is not necessarily a mistake: it is an entry price, to weigh against the cost of waiting.
The rules: tiered minimum down payment, premium by ratio
Canada's minimum down payment is tiered: 5% on the first $500,000 of the price, 10% on the portion between $500,000 and $1.5M, and 20% once the price reaches $1.5M — the insured-mortgage cap was raised to $1.5M in December 2024. Below 20% down, mortgage default insurance (CMHC, Sagen or Canada Guaranty) is mandatory, and its premium depends on the financing ratio: 4.00% of the loan when you finance 90.01% to 95% of the price, 3.10% from 85.01% to 90%, 2.80% from 80.01% to 85% — and $0 at 20% down or more. The insured 30-year amortization (first-time buyers and new builds, since December 2024) adds a 0.20-point surcharge.
The detail that changes everything: the premium is not paid at signing. It is added to the loan — so you pay interest on it for the entire amortization. The number on the schedule is not what the premium costs you: it is its starting price.
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Standard insurer schedule (owner-occupied, 25-year amortization; the insured 30-year adds 0.20 point). For guidance only — excludes municipal taxes and other closing costs.
The real cost, quantified on a $500,000 home
Take, as an example, a $500,000 home — the same running example as our closing-costs table by province. With 5% down ($25,000), the base loan is $475,000, financing 95%: a 4% premium, i.e. $19,000, added to the loan — which climbs to $494,000. At 5% interest over 25 years, the premium alone adds about $111 a month: over the full amortization, you will have paid around $33,300 for it — the premium, plus some $14,300 of interest on the premium.
With 20% down ($100,000): no premium, and the monthly payment drops from about $2,888 to $2,338. The gap between the two scenarios is not just the premium: it is also $75,000 more down payment to gather — and that is exactly where the trade-off in the last section plays out.
The closing-day trap: sales tax on the premium
Three provinces tax the mortgage insurance premium: Quebec (9.975% QST), Ontario (8%) and Saskatchewan (6%). And unlike the premium itself, this tax cannot be added to the loan: it is paid in cash at closing, at the notary's or lawyer's, on top of the down payment and the land transfer tax. On our 5%-down example: $1,895 in Quebec, $1,520 in Ontario, $1,140 in Saskatchewan.
A closing budget that misses it ends up scraping drawers the week of signing. The simple rule: if your down payment is under 20% in one of these three provinces, add the premium tax to your cash-at-closing list, starting at pre-approval.
When 5% down is still the right call
After all these numbers, should the 5% down payment be condemned? No — and this is where the trade-off gets interesting. Saving the $75,000 that separate 5% from 20% on a $500,000 home can take years. Meanwhile, you pay rent, and the market moves: if prices in your area rise 4% a year, that is $20,000 more every year on the same property — the order of magnitude of the entire premium. Waiting can literally cost more than insuring.
The right answer depends on your current rent, your savings pace, your local market's trajectory and your risk tolerance. It is a line-by-line calculation, with your real numbers — the kind of trade-off a good mortgage broker quantifies with you before choosing the down payment, not after. And if the question is rather where to find the down payment, see our HBP + FHSA pillar.
Frequently asked questions
What is the minimum down payment in Canada in 2026?
5% on the first $500,000 of the price, 10% on the portion between $500,000 and $1.5M, and 20% from $1.5M up (insured-mortgage cap raised to $1.5M in December 2024). On a $500,000 home that is $25,000; on $700,000, $45,000 ($25,000 + 10% of $200,000).
How much is the mortgage default insurance premium?
It depends on the loan-to-value ratio: 4.00% of the loan when financing 90.01% to 95%, 3.10% between 85.01% and 90%, 2.80% between 80.01% and 85%. At 20% down or more, no premium. It is added to the loan and financed — so you also pay interest on it for the whole amortization.
Which provinces tax the insurance premium?
Quebec (9.975% QST), Ontario (8%) and Saskatchewan (6%). This tax cannot be added to the loan: it is paid in cash at closing. On a $19,000 premium, expect $1,895 in Quebec, $1,520 in Ontario and $1,140 in Saskatchewan.
Is putting 5% down a mistake?
Not necessarily. The premium is the price of entering the market years earlier — and if prices rise, waiting until you have 20% can cost more than the premium. It is a trade-off to quantify against your rent, savings pace and local market, ideally with a verified mortgage broker.
Schedules and thresholds in force in 2026 — they change: confirm the parameters at the official source (CMHC) or with a licensed professional.
Go further
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