Insurable vs. Uninsured Mortgages
Mortgages in Canada can be insured, insurable or uninsured. Insured mortgages allow you to purchase a home with as little as 5% of the purchase price as a down payment. Insurable and uninsured mortgages require a minimum 20% down payment.
However, the differences go beyond that, as insurable and uninsured mortgages have different requirements for purchase price, default insurance, interest rates, amortization and property eligibility. If you plan to put 20% or more down, we will help you compare insurable and uninsured mortgages to choose the right option for your homeownership needs.
Key Takeaways
- Insurable mortgages require a minimum 20% down payment but can still be default-insured, offering access to lower rates.
- Uninsured mortgages also require a 20% or more down payment but cannot be default-insured, often resulting in slightly higher interest rates.
- Uninsured mortgages are a good option for investment properties, purchases over $1.5 million, and longer amortizations.
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What Is an Insurable Mortgage?
An insurable, or low-ratio, mortgage is a loan in which the borrower makes a down payment of at least 20% but still needs mortgage default insurance. Lenders typically cover the premium on insurable mortgages, while some smaller lenders may require the borrower to pay the premium.
Insurable mortgages have restrictions, including a maximum purchase price of less than $1 million, a 25-year amortization period, and the property must be owner-occupied or occupied by immediate family. Mortgage lenders can offer lower interest rates when they insure mortgages through low-ratio or portfolio insurance, because it reduces the lender’s default risk.
Will the Insurable Mortgage Limit Rise to $1.5 Million?
The 2026 Federal Budget proposes raising the price limit for insurable mortgages from $1 million to $1.5 million and allowing 30-year amortizations when at least one borrower is a first-time buyer or the home is newly built. The budget gives no effective date, and as of writing, no federal or insurer notice has set one, so the original limits still apply today.
This shouldn’t be confused with the high-ratio rules. The $1.5 million price cap and the 30-year option for first-time buyers and new builds have applied to insured (high-ratio) mortgages since December 15, 2024. Our Federal Budget 2026 article explains each proposal and its date.
What Is an Uninsured Mortgage?
An uninsured or conventional mortgage requires at least a 20% down payment and does not require mortgage default insurance. Uninsured mortgages have no home price restrictions and apply to refinances, investment properties, second homes not used by immediate family members, properties priced above the insurable limit of $1 million, and those with longer amortization periods (up to 30 years with prime lending). A mortgage can also be uninsured when the borrower meets the criteria for an insurable mortgage but neither the lender offers it nor the borrower chooses to purchase default insurance. In both cases, the down payment is sufficient to avoid default insurance.
The lender takes on more risk because uninsured mortgages lack default insurance. To offset this, lenders often charge uninsured borrowers higher interest rates than those with insurable or insured mortgages. However, the savings from not paying the premium upfront, or the added interest costs of adding default insurance to your mortgage, could offset the higher interest rates on uninsured mortgages.
When Would You Need an Uninsured Mortgage?
Borrowers often use uninsured mortgages for properties that don’t meet the requirements for insured or insurable mortgages. Common reasons you may need an uninsured mortgage include the following:
- The borrower puts down 20% or more of the purchase price.
- If the home purchase price is $1 million or more, you may be disqualified from an insurable mortgage.
- If the amortization period exceeds 25 years.
- If the property will be occupied by an unrelated person or a secondary home with multiple units (not occupied by an immediate family member).
- If the property is used for investment purposes (such as a rental property).
- If you’re refinancing the home or mortgage.
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Comparing Insurable vs. Uninsured Mortgages
Downpayment Requirements: Both insurable and uninsured mortgages require a downpayment of 20% or more, but the key difference is whether the mortgage qualifies for insurance.
Amortization Period: Insurable Mortgages are limited to a maximum of 25 years. Uninsured mortgages with prime lending can have a longer amortization period, up to 30 years.
Interest Rates: Insurable mortgages usually offer lower interest rates because the lender can insure them. The lender’s increased risk adds a risk premium to uninsured mortgage pricing, with higher interest rates.
Property Type Eligibility: Insurable mortgages apply only to properties under $1 million that are owner-occupied or occupied by an immediate family member. Uninsured mortgages cover properties priced at $1 million or more, second homes not occupied by an immediate family member, investment properties, and any purchase where the lender doesn’t insure the mortgage.
Insured vs. Insurable vs. Uninsured at a Glance
| Item | Insured | Insurable | Uninsured |
|---|---|---|---|
| Down payment | Less than 20% | 20% or more | 20% or more |
| Default insurance | Required (CMHC, Sagen or Canada Guaranty) | Lender insures at its option (typically back-end portfolio) | None |
| Who pays the premium | Borrower | Usually the lender | Not applicable |
| Maximum purchase price | Below $1.5 million | Below $1 million (Budget 2026 proposes $1.5 million) | No insurer limit; lender policy applies |
| Maximum amortization | 25 years; 30 years for first-time buyers and new builds | 25 years (Budget 2026 proposes 30 years for first-time buyers and new builds) | Up to 30 years with prime lending |
| Typical rate tier | Lowest | Close to insured | Highest |
Who Pays for Default Insurance on an Insurable Mortgage?
With an insurable mortgage, the lender typically pays the mortgage default insurance premium, but some lenders may require the borrower to pay it. This insurance, also called portfolio or back-end insurance, lets the lender bundle the mortgage with other loans in a similar portfolio to reduce risk. The borrower benefits from this insurance through lower interest rates.
How Do Interest Rates Differ Between Insurable and Uninsured Mortgages?
Interest rates for uninsured mortgages are generally higher than those for insurable mortgages. Without insurance, the lender assumes higher default risk. Insurable mortgages often offer more competitive rates, close to what you’d get with an insured mortgage, because the lender can reduce risk through default insurance, even if the borrower isn’t paying for it.
How Insurable vs Uninsured Rates Affect Your Monthly Payment
Today, an insurable borrower may access a 5-year fixed rate of 4.64%, while an uninsured borrower may receive 4.95%.
On a $625,000 home with a $125,000 down payment (that’s 20% down on a $500,000 mortgage) and a 25-year amortization, the monthly payments are:
Insurable payment: $2,820
Uninsured payment: $2,922
View examples of current mortgage payments using today’s rates.
See how insurance type affects your qualifying income.
Benefits of Insurable Mortgages
Lower Interest Rates: Since lenders can insure these mortgages, borrowers often benefit from more competitive rates.
No Premiums for Borrowers: In most cases, the lender will cover the insurance premium. However, some lenders may require borrowers to pay the premium.
Benefits of Uninsured Mortgages
Longer Amortization Periods: With uninsured mortgages, borrowers can opt for an amortization period of up to 30 years with prime lending, and this may result in lower monthly payments.
Suitable for Investment Properties: An uninsured mortgage may be your best option if you purchase a rental or investment property.
Higher Loan Limits: Uninsured mortgages allow borrowers to purchase homes priced at $1 million or more, whereas insurable mortgages require a purchase price below $1 million.
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Frequently Asked Questions (FAQ) About Insurable vs Uninsured Mortgages
What’s the minimum down payment for an insurable mortgage?
The minimum down payment for an insurable mortgage is 20% of the lower of the property’s appraised value or purchase price.
What’s the difference between insurable and uninsured mortgages?
Insurable mortgages have default insurance t,hat is either paid by the lender or the borrower. They also have restrictions, such as a maximum 25-year amortization and a purchase price of less than $1 million. Uninsured mortgages do not require default insurance and allow purchases of properties over $1 million and amortizations of up to 30 years.
Who pays the insurance premium for an insurable mortgage?
The lender typically pays the premium for an insurable mortgage through portfolio insurance, though some lenders may require the borrower to cover the insurance premiums.
Can I get an uninsured mortgage for an investment property?
Uninsured mortgages are commonly used for investment properties, second homes not occupied by the owner or their immediate family, or properties valued at $1 million or more.
How does amortization differ between insurable and uninsured mortgages?
Insurable mortgages have a maximum amortization of 25 years, while uninsured mortgages can extend up to 30 years with prime lending.
Will the Federal Budget 2026 raise the insurable mortgage limit to $1.5 million?
The 2026 Federal Budget proposes raising the insurable mortgage price limit from $1 million to $1.5 million, but it gives no effective date, so the $1 million limit still applies. The proposal would also allow 30-year amortizations when at least one borrower is a first-time buyer or the home is newly built. Both changes would align with the current policy for default-insured mortgages, available to borrowers with less than 20% down payments.
Can I get a 30-year amortization on an insurable mortgage?
Under today’s rules, you cannot finance a mortgage with a 30-year amortization as an insurable mortgage. Today, insurable mortgages are limited to a 25-year amortization. Budget 2026 proposes 30 years for insurable mortgages when at least one borrower is a first-time buyer or the home is newly built, with no effective date. Uninsured mortgages can be amortized for up to 30 years with prime lending.
Final Thoughts
While both types require a 20% down payment, choosing between an insurable and an uninsured mortgage depends on the property’s value, purpose, and your desired amortization. An insurable mortgage could be ideal if you meet the eligibility criteria and want a lower interest rate.
If you’re eyeing a higher-value property, want a longer amortization, or plan to use the property for investments, an uninsured mortgage might be the better fit despite higher interest rates.
Contact nesto’s mortgage experts today for personalized home financing guidance to ensure you get the best solution for your insurable or uninsured mortgage.
This article is a general discussion and isn’t legal, tax or real estate advice. Nesto provides mortgage guidance. For advice on your situation, speak with a qualified tax professional or a real estate lawyer.
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