Even though the borrower doesn’t pay for insurance, the lender may choose to insure the mortgage at their own expense (called “portfolio insurance” or “bulk insurance”). This costs the lender about 0.5-2.5% of the mortgage amount. Lenders pass some of this cost on through slightly higher rates.
The borrower’s benefit: slightly lower rates than uninsurable, because the lender can reduce their capital requirements.
Uninsurable mortgages carry the highest rates because lenders must hold more capital and bear all default risk:
Mortgage Type
Typical 5-Year Fixed Rate
Spread Above Insured
Insured
4.29%
—
Insurable
4.39–4.49%
+0.10–0.20%
Uninsurable
4.54–4.69%
+0.25–0.40%
Common Scenarios and Classification
Scenario
Down Payment
Purchase Price
Amortization
Classification
Buying $500K home, 5% down
$25,000
$500,000
25 years
Insured
Buying $500K home, 20% down
$100,000
$500,000
25 years
Insurable
Buying $500K home, 20% down
$100,000
$500,000
30 years
Uninsurable
Buying $1.2M home, 20% down
$240,000
$1,200,000
25 years
Insurable
Buying $1.6M home, 20% down
$320,000
$1,600,000
25 years
Uninsurable
Refinancing $400K mortgage
N/A
N/A
Any
Uninsurable
Buying rental property, 20% down
$80,000
$400,000
25 years
Depends on insurer
Down Payment Rules and Minimum Thresholds
Purchase Price
Minimum Down Payment
Mortgage Category
Up to $500,000
5%
Insured
$500,001–$999,999
5% on first $500K + 10% on remainder
Insured
$1,000,000–$1,499,999
20%
Insurable
$1,500,000+
20%
Uninsurable
Down Payment Examples
Purchase Price
Minimum Down Payment
Amount
Category
$400,000
5%
$20,000
Insured
$600,000
5% of $500K + 10% of $100K
$35,000
Insured
$800,000
5% of $500K + 10% of $300K
$55,000
Insured
$1,000,000
20%
$200,000
Insurable
$1,500,000
20%
$300,000
Uninsurable
$2,000,000
20%
$400,000
Uninsurable
Total Cost Comparison
Item
Insured (10% down)
Insurable (20% down)
Uninsurable (20% down, 30yr)
Home price
$500,000
$500,000
$500,000
Down payment
$50,000
$100,000
$100,000
Mortgage
$450,000
$400,000
$400,000
CMHC premium
$13,950
$0
$0
Total mortgage
$463,950
$400,000
$400,000
Rate
4.29%
4.39%
4.59%
Monthly payment
$2,525
$2,178
$2,069
Total interest (full term)
$293,511
$253,329
$344,878
Total cost (mortgage + interest + premium)
$757,461
$653,329
$744,878
Key insight: Despite paying CMHC insurance, the insured mortgage gets the best rate. But the insurable mortgage (20% down) has the lowest total cost because you avoid the insurance premium and borrow less. The uninsurable 30-year amortization has the lowest monthly payment but the highest total interest.