# How does mortgage insurance enable lower down payments?

> Mortgage insurance lowers the risk for lenders, allowing them to offer mortgages to borrowers with down payments between 5% and 20%.

Category: Purchasing
Last verified: 2026-02-18
Source: https://ratellow.com/faqs/purchasing/how-does-mortgage-insurance-enable-lower-down-payments

## Answer
### Scenario: Sarah's First Condo
Consider Sarah, who is purchasing her first condo for $400,000. Here is how mortgage insurance impacts her required upfront savings:

| Scenario | Down Payment % | Required Savings | Loan-to-Value (LTV) |
|---|---|---|---|
| Without Insurance | 20% | $80,000 | 80% |
| **With Insurance** | **5%** | **$20,000** | **95%** |


| Loan-to-Value (LTV) | Minimum Equity Requirement | Max Purchase Price/Lending Value  |
|-----------------------|-----------------------------|------------------------------------|
| Up to 95% (1-2 units) | 5% of first $500k, 10% remainder | < $1,500,000                       |
| Up to 90% (3-4 units) | 10%                         | < $1,000,000                       |
| Up to 80%            | 20%                         | < $1,000,000 or < $2,000,000 (Refinance)|

## Institutional highlights
- Mortgage insurance helps you buy a home with a smaller down payment.
- You can buy a home with as little as 5% down because the insurer covers up to 95% of the home's value.
- Your down payment can come from your savings, the sale of a previous property, or a gift from a family member.
- If you have good credit, you may be able to use other down payment sources when your down payment is between 5% and 10%, but you can't borrow the money.
- The longest you can take to pay off your mortgage is usually 25 years.

## Related guide
- https://ratellow.com/guides/insured-advantage

## Sources
- Page 2 — https://assets.cmhc-schl.gc.ca/sf/project/cmhc/pdfs/factsheets/new/cmhc-quick-reference.pdf#page=2
- Page 3 — https://assets.cmhc-schl.gc.ca/sf/project/cmhc/pdfs/factsheets/new/cmhc-quick-reference.pdf#page=3
- Canada Guaranty — https://www.canadaguaranty.ca/lenders/underwriting-guidelines/
- Mortgage insurance — https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/residential-mortgage-underwriting-practices-procedures-guideline-2017#2.5.1