Two rules decide what a Canadian home actually costs you before a lender even looks at your income: with less than 20% down, you must buy mortgage default insurance; and whatever rate you negotiate, you must qualify as if it were higher. Both rules surprise buyers every week. Here is how they work, with 2026 numbers.

Minimum down payment: the sliding scale

Since December 2024, the insured limit is $1.5 million. The minimum down payment is 5% of the first $500,000 of the price plus 10% of the portion between $500,000 and $1,500,000. On a $650,000 home that is $25,000 + $15,000 = $40,000 — not the $32,500 a flat 5% would suggest. At $1,500,000 or more, the minimum jumps to a full 20% and insurance is not available at all.

CMHC insurance: what it is and what it costs

Default insurance protects the lender if you default — but you pay the premium. It is provided by CMHC, Sagen or Canada Guaranty at the same standard rates, charged on the mortgage amount and almost always added to the loan: 4.00% at 90.01–95% loan-to-value (5–9.99% down), 3.10% at 85.01–90%, 2.80% at 80.01–85%, and no premium at 20%+ down. Amortizing over 25 years (where allowed) adds 0.20%. Two costs hide inside those numbers: you pay interest on the premium for the life of the mortgage, and Ontario, Quebec and Saskatchewan charge provincial sales tax on the premium, payable in cash on closing. On a $585,000 mortgage (the $650,000 home with 10% down), the premium is $18,135 — plus, in Ontario, $1,450.80 of tax at closing.

The stress test: qualify high, pay low

Under OSFI’s Guideline B-20 (and the federal rules for insured mortgages), you must qualify at the greater of your contract rate + 2 percentage points, or 5.25%. At a 4.50% contract rate, you are tested at 6.50% — on the example mortgage, a payment of about $4,040 a month instead of the $3,338 you will actually pay. The lender then checks that payment against two ratios: GDS (mortgage + property tax + heating + half of condo fees ≤ ~39% of gross income) and TDS (all debt payments ≤ ~44%). The stress test exists so a renewal at higher rates does not sink you; its practical effect is to cut your maximum purchase price by roughly 15–20% versus qualifying at the contract rate. Since November 2024, it no longer applies to uninsured mortgage holders simply switching lenders at renewal.

Using the numbers before you shop

Run your scenario in the mortgage calculator: it applies the sliding minimum down payment, adds the right CMHC tier, uses Canadian semi-annual compounding, and shows both your real payment and the stress-test payment your lender will use. Then sanity-check the result against your actual gross income with the GDS/TDS limits. If the stress-test payment pushes TDS over 44%, the options are the classic ones — bigger down payment, lower price, or less other debt — and they are much easier to face before you have a signed offer than after.