Alright, let’s cut through the mortgage noise for a second.
You’ve found your dream home. It’s got the cozy kitchen nook, a backyard big enough for the dog, and you’re mentally arranging furniture already. But then your lender says something like:
“You’ll need mortgage insurance.”
Cue the eyebrow raise. The next question that probably hits you is:
“Wait… how much is mortgage insurance, actually?”
Good news: we’re breaking it down without the boring finance lecture.
First, What Even Is Mortgage Insurance?
Before we talk numbers, let’s clear up what we’re even paying for here.
Mortgage insurance (sometimes called PMI in the U.S. or CMHC insurance in Canada) is something you usually have to pay if your down payment is less than 20%.
Spoiler: It’s not for your protection. It protects the lender, in case you default on the loan.
Yeah, that’s the part that stings a little. You’re footing the bill to make your lender feel better. But weirdly enough, it’s also what makes it possible to buy with less money down. So… silver lining?
So, How Much Is Mortgage Insurance?
Here’s where it gets a little “it depends.” But I’ll make it simple.
In the U.S. (PMI – Private Mortgage Insurance)
Typically costs between 0.5% and 2% of your loan amount per year.
The exact rate depends on:
Your credit score
The size of your down payment
The mortgage type
Example:
Let’s say you’re buying a $300,000 home with 10% down.
That’s a $270,000 loan.
If your PMI is 1% annually:
$270,000 x 1% = $2,700/year
Or about $225/month, added to your mortgage payment.
You’ll pay this until you hit 20% equity (more on that later).
In Canada (CMHC Mortgage Insurance)
It’s a bit different. You pay it once, upfront (but most people roll it into their mortgage).
Premium ranges from 2.8% to 4% of your mortgage amount.
The smaller your down payment, the higher the rate.
Example:
Same $300,000 home, 5% down = $285,000 mortgage
CMHC premium at 4% = $11,400
That gets added to your mortgage, so you’re now borrowing $296,400.
👉 Here’s CMHC’s official premium calculator
A Quick Personal Story
When my sister bought her first house, she was short about $8,000 to hit the 20% down mark. She was crushed—she’d worked two jobs and saved for years.
Her broker told her about PMI. She groaned at the thought of extra costs, but it let her buy the house now instead of spending another year renting.
“I paid $147 a month in PMI,” she said. “But I also gained $20K in equity that year thanks to rising home prices. Worth it.”
It’s not always ideal, but sometimes, mortgage insurance is the trade-off for getting in the door sooner.
What Affects the Cost of Mortgage Insurance?
Here’s a little checklist of what lenders look at when calculating your premium:
Credit score – Higher = lower premiums (especially in the U.S.)
Loan-to-value ratio (LTV) – Bigger down payment = lower risk = lower cost
Type of mortgage – Conventional loans = PMI; government-insured loans like FHA have different rules
Length of mortgage – Shorter terms can sometimes mean cheaper premiums
Can You Get Rid of It?
Yep—and you probably should, when you can.
In the U.S.:
Once you hit 20% equity, you can usually cancel PMI.
Some lenders cancel it automatically at 22% equity.
Or, refinance to a new loan if your home has appreciated fast.
In Canada:
CMHC insurance stays for the life of the loan.
Only way out is to refinance or pay off the mortgage.
So, if you’re in the U.S., set a reminder to cancel it when you’ve got enough equity. It’s easy to forget, and you could be tossing money every month.
Tips to Save on Mortgage Insurance
Boost your credit score before applying (seriously—it matters).
Put down just a bit more, if you’re close to 20%.
Ask about lender-paid mortgage insurance (LPMI)—they cover the cost, but you might pay a slightly higher rate.
Compare different loan options—some government loans include built-in insurance premiums that never drop off.
Useful Tools & External Links
FAQ: How Much Is Mortgage Insurance?
Q: Is mortgage insurance tax deductible?
A: In the U.S., it might be—check the latest IRS rules or ask a tax pro. In Canada, it’s usually not deductible.
Q: Does mortgage insurance cover me if I die?
A: Nope. That’s mortgage life insurance, which is totally separate.
Q: Can I pay it all upfront?
A: In the U.S., some lenders let you pay PMI upfront. In Canada, the premium is always calculated upfront (you can roll it into your mortgage).
Q: Is mortgage insurance worth it?
A: If it gets you into a home years sooner? Often, yes. But run the numbers and make sure you’re not stretching your budget too thin.
Final Thoughts: What’s the Real Cost of Mortgage Insurance?
So, how much is mortgage insurance? Somewhere between “ugh” and “not that bad,” depending on your situation.
The good news is: it’s not forever (at least not always). And it might be the thing that opens the door to homeownership years earlier than you thought possible.
The key takeaway?
Know the cost. Plan for it. And make a strategy to ditch it as soon as it makes sense.
If you need help calculating your specific premium—or figuring out how to avoid it—just ask. I can walk you through it with actual numbers, not just vague charts.
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