When purchasing your first home, one of the most important mortgage decisions is whether your financing will be insured or uninsured. The difference affects how much you need for a down payment, how your mortgage is structured, and how much flexibility you have long term.
Recent rule changes have created additional options specifically for first time home buyers, particularly around purchase price limits and amortization periods.
Below is a clear explanation using an example of a first time buyer purchasing a $750,000 home.
What is an insured mortgage
An insured mortgage applies when the buyer puts less than 20 percent down.
In Canada, mortgage default insurance is required whenever the down payment is under 20 percent. This insurance protects the lender, not the buyer, in the event of default. The insurance is provided through CMHC, Sagen, or Canada Guaranty, and the premium is typically added to the mortgage rather than paid out of pocket.
Under the updated rules, first time home buyers may purchase homes up to $1.5 million with insured financing, provided they meet the minimum down payment requirements.
In addition, first time buyers now have access to insured 30-year amortizations, which can significantly reduce monthly payments compared to the traditional 25-year limit.
Insured mortgages also typically qualify for the lowest interest rates available in the market.
What is an uninsured mortgage
An uninsured mortgage applies when the buyer puts at least 20 percent down or chooses not to use mortgage default insurance.
Because the lender assumes more risk, uninsured mortgages usually come with slightly higher interest rates. However, there is no insurance premium added to the mortgage balance.
Uninsured mortgages may also allow amortizations of up to 30 years depending on lender guidelines and borrower qualification.
Example using a $750,000 purchase
Let’s assume a first time buyer is purchasing a home in Burlington for $750,000.
With insured financing, Canada’s minimum down payment rules apply. Five percent is required on the first $500,000, which equals $25,000. Ten percent is required on the remaining $250,000, which equals another $25,000.
The total minimum down payment is $50,000, or approximately 6.7 percent.
The mortgage amount before insurance would be $700,000. Mortgage insurance at this level is roughly four percent, or about $28,000. This premium is added to the mortgage, bringing the final mortgage amount to approximately $728,000.
The benefit of this approach is a significantly lower cash requirement and access to insured rates, which are typically the lowest in the market. The tradeoff is a higher mortgage balance due to the insurance premium.
With an uninsured mortgage, the buyer must put at least 20 percent down. On a $750,000 purchase, this equals $150,000.
The resulting mortgage would be $600,000 with no insurance premium added. While this requires an additional $100,000 up front, it results in a lower mortgage balance and reduced long term interest costs.
Comparing the two options
With an insured mortgage, the buyer purchases with $50,000 down, carries a mortgage of approximately $728,000, benefits from lower interest rates, and may now access a 30-year amortization as a first time buyer.
With an uninsured mortgage, the buyer puts $150,000 down, carries a $600,000 mortgage, avoids insurance costs entirely, and may also qualify for a 30-year amortization depending on lender policy.
Which option is better
There is no universal right answer.
Insured financing may be ideal for buyers who want to enter the market sooner, preserve savings, or benefit from lower interest rates and extended amortization options.
Uninsured financing may suit buyers with strong savings who want to minimize debt, avoid insurance costs, or plan to refinance or upgrade in the future.
In many cases, the decision comes down to whether it is more important to keep cash available today or reduce borrowing costs over time.
Final thoughts
For first time buyers purchasing a $750,000 home, insured versus uninsured financing is no longer just about the size of the down payment. New rules around purchase price limits and amortization options have created more flexibility, but also more complexity.
That is why reviewing the full mortgage structure matters just as much as reviewing the rate. The right mortgage should support your long term plans, not simply meet minimum qualification requirements.