Insured vs. Insurable Mortgages

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The difference between insured and insurable mortgages affects how much you need for a down payment, who pays default insurance premiums, and how much you may pay in interest over time. Mortgages in Canada can either be insured, insurable, or uninsured. 

Insured mortgages allow borrowers to purchase a property with as little as 5% of the purchase price as a down payment and provide access to the lowest interest rates. Insurable mortgages require a minimum 20% down payment but still offer access to competitive rates that are nearly as low as those for insured mortgages. 

This guide breaks down how insured and insurable mortgages work and explains how purchase price, amortization, and insurance costs can affect which option makes more sense for your mortgage strategy.

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Key Takeaways

• Insured mortgages require less than 20% down payment and offer the lowest rates.
• Insurable mortgages require 20% or more down and can still offer rates close to insured pricing.
• A slightly higher insurable rate can lower total interest costs by avoiding a borrower-paid insurance premium.

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What Is an Insured Mortgage?

An insured or high-ratio mortgage applies when the down payment is less than 20% of the purchase price. Borrowers are required to pay a premium for mortgage default insurance protecting the lender against borrower default. This premium can be added to the mortgage balance and paid off over time or paid up front as a lump sum at closing. Premiums are charged based on the loan-to-value (LTV) ratio, with the total amount payable varying based on the mortgage amount. 

High-ratio mortgages have restrictions, including a maximum purchase price of less than $1.5 million. The amortization is capped at 25 years unless the borrower is considered a first-time homebuyers (FTHBs) or the property is a new build, in which case the amortization can be up to 30 years.

What Is an Insurable Mortgage?

An insurable or low-ratio mortgage is a loan in which the down payment is at least 20% of the purchase price and the mortgage meets eligibility requirements for mortgage default insurance. Unlike insured mortgages, where the borrower is required to pay the insurance premium, insurable mortgages are typically backend portfolio default-insured by the lender. 

Insurable mortgages also come with restrictions, including a maximum purchase price of under $1 million, a maximum amortization of 25 years, and a requirement that the property be owner-occupied or occupied by immediate family.

When Would You Need an Insured Mortgage?

Insured mortgages are required when a borrower does not have a down payment of at least 20%. Some borrowers who have a 20% down payment saved choose to put down less to access better rates. Common reasons an insured mortgage is required or may make sense include: 

• You put down less than 20% of the purchase price.
• The purchase price of the property is less than $1.5 million.
• The amortization is 25 years or less (30 years for first-time homebuyers and new builds).
• The property is owner-occupied. 
• Your debt service ratios fall within insured guidelines, and you want to access better rates.

When Would You Need an Insurable Mortgage?

Insurable mortgages apply when a borrower makes a down payment of at least 20% and the mortgage qualifies under the insurer’s guidelines. While borrowers who put down 20% or more have access to uninsured mortgages with fewer borrowing restrictions, some may choose an insurable mortgage because it offers a lower rate. Common reasons an insurable mortgage may make sense include: 

• You put down at least 20% of the purchase price. 
• The purchase price of the property is less than $1 million. 
• The amortization is 25 years or less. 
• The property is owner-occupied. 
• The mortgage qualifies under insurer guidelines, and you want access to more competitive rates. 

Comparing Insured vs. Insurable Mortgages

Choosing between an insured and an insurable mortgage is not only about your down payment. It directly affects your interest rate, total borrowing cost, and your borrowing flexibility. 

Feature	Insured Mortgage	Insurable Mortgage
Down Payment	5% to 19.99%	20% or more
Mortgage Default Insurance	Required (borrower paid)	Required (lender paid)
Typical Interest Rates	Lowest rates compared to insurable and uninsured	Lower than uninsured but higher than insured
Purchase Price Limit	Up to $1.5 million	Up to $1 million
Amortization	Up to 25 years (30 for FTHB or new builds)	Up to 25 years
Property Type	Owner-occupied only	Owner-occupied only
Refinancing	Not eligible	Not eligible

Why Insured and Insurable Mortgages Often Have Lower Rates

Insured and insurable mortgages often have lower interest rates than uninsured mortgages because they carry less risk to the lender. When a mortgage is backed by the federal government, it protects the lender against borrower default. This added protection can lower lenders’ funding costs, helping them pass the savings on by offering the most competitive rates. 

Insurable mortgages benefit from this pricing advantage because they still meet insurer guidelines even when the borrower puts down 20% or more. As a result, insurable rates are often lower than uninsured rates, though they may still be slightly higher than insured rates. For borrowers with a larger down payment, this can create a middle ground between accessing better pricing and avoiding the added cost of mortgage default insurance that’s required with an insured mortgage.

Mortgage Rates for Insured vs Insurable Mortgages

An insured borrower today may access 4.04%, while an insurable borrower may receive 4.09%.

On a $500,000 mortgage with a 25-year amortization:

Insured payment: $2,681
Insurable payment: $2,614

View current mortgage payment examples using today’s rates.

See how insurance type affects your qualification income.

Who Pays for Default Insurance on an Insured Mortgage?

Mortgage default insurance is paid by the borrower, not the lender, protecting the lender against borrower default. The mortgage insurance premium can either be added directly to the mortgage amount and paid over time as part of regular mortgage payments, or up front as part of your closing costs. 

Most borrowers opt to include the premium in the mortgage, making it a part of the mortgage balance. This means interest will be calculated on the premium, as it’s now part of your mortgage, and paid over the life of the loan. The premium cost is based on the loan-to-value ratio, with higher premiums applied when the down payment is smaller and decreasing as you put down more.

Who Pays for Default Insurance on an Insurable Mortgage?

For an insurable mortgage, mortgage default insurance is usually paid by the lender, protecting the lender against borrower default. Default insurance on insurable mortgages is called portfolio, or back-end, insurance, which allows the lender to bundle the mortgage with others in a similar portfolio to reduce risk. It also provides the lender access to low-cost funding through mortgage securitization, unlike uninsured mortgages, which must be funded with the lender’s own capital. 

Since the borrower usually does not pay the premium directly, it is not added to the mortgage amount and does not increase the loan balance as it would with an insured mortgage. This is one reason insurable mortgages can result in lower monthly payments and lower total interest costs, even if their interest rates are slightly higher than insured mortgage rates. The exact treatment can vary by lender, but from the borrower’s perspective, the insurance cost is often built into the lender’s pricing rather than charged as a separate premium.

How Insured vs Insurable Rates Affect Your Monthly Payment

One of the biggest misconceptions is that the lowest mortgage rate always leads to the lowest borrowing costs. In reality, insured mortgages, while they have lower rates they also require mortgage default insurance to be paid by the borrower. Since the premium is usually added to the mortgage balance, the borrower ends up paying interest on a larger loan amount than they would if they paid the insurance up front or put more down and chose an insurable mortgage. 

As the down payment increases from 5% to 10% to 15%, the default insurance premium decreases, reducing the total mortgage amount and lowering both the monthly payment and the total interest paid. That is why borrowers who put more down within the insured range can often reduce their overall cost while still benefiting from insured pricing.

Once the down payment reaches 20%, the mortgage may qualify as insurable. Even if the rate is slightly higher than an insured mortgage, the borrower avoids adding an insurance premium to the loan balance. That lower starting mortgage amount can result in both a lower monthly payment and lower total interest costs over the mortgage term. In this example, the insurable mortgage yields the lowest monthly payment and interest cost, making it the most cost-efficient option overall.

	Insured Mortgage (5% Down)	Insured Mortgage (10% Down)	Insured Mortgage (15% Down)	Insurable Mortgage (20% Down)
Purchase Price	$500,000	$500,000	$500,000	$500,000
Down Payment	$25,000	$50,000	$75,000	$100,000
Mortgage Amount (before insurance)	$475,000	$450,000	$425,000	$400,000
Insurance Premium	$19,000 (4.00%)	$13,950 (3.10%)	$11,900 (2.80%)	$0 (lender pays)
Total Mortgage Amount	$494,000	$463,950	$436,900	$400,000
Interest Rate	4.04%	4.04%	4.04%	4.09%
Monthly Payment (25-year amortization)	$2,609.36	$2,450.54	$2,307.67	$2,123.64
Total Interest (5-year term)	$92,901.25	$87,250.07	$82,163.08	$76,178.04

The Mortgage Stress Test Still Applies

Whether you have a minimum down payment or 20%, you still need to qualify under the mortgage stress test set by the Office of the Superintendent of Financial Institutions (OSFI). This means even if you choose an insured or insurable mortgage, the rate you are offered is not the rate you are qualified with. The stress test requires you to qualify at either 5.25% or the contract rate plus 2%, whichever is higher. This ensures that borrowers can still handle higher mortgage payments if rates rise in the future. 

For example, if you are offered an insured rate of 4.04%, you will be qualified at 6.04%. If you are offered an insurable rate of 4.09%, you will be qualified at 6.09%. While insured and insurable mortgages can improve affordability through lower interest rates, both options are still tested against higher qualifying rates, which can impact the amount you qualify to borrow.

Frequently Asked Questions (FAQ) About Insured and Insurable Mortgages

Final Thoughts

Insured and insurable mortgages can both help borrowers access lower rates compared to uninsured mortgages, but they serve different needs. Insured mortgages are designed for borrowers who put down less than 20% and want to enter the market sooner. Insurable mortgages are better suited for borrowers with 20% or more down who meet insurable lending criteria, allowing them to access more competitive rates.

If you’re deciding between insured and insurable mortgages and want to understand which option puts you in a stronger financial position, connect with nesto mortgage experts. We’ll help you compare real numbers and find the mortgage strategy that works best for your homebuying plans.

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Why Choose nesto

At nesto, our commission-free mortgage experts, certified in multiple provinces, provide exceptional advice and service that exceeds industry standards. Our mortgage experts are salaried employees who provide impartial guidance on mortgage options tailored to your needs and are evaluated based on client satisfaction and the quality of their advice. nesto aims to transform the mortgage industry by providing honest advice and competitive rates through a 100% digital, transparent, and seamless process.

nesto is on a mission to offer a positive, empowering and transparent property financing experience – simplified from start to finish.

Contact our licensed and knowledgeable mortgage experts to find your best mortgage rate in Canada.

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