In Canada a down payment under 20% of the price normally means you must buy mortgage default insurance, which the federal government calls mortgage loan insurance. The Financial Consumer Agency of Canada names three providers, CMHC, Sagen and Canada Guaranty, and your lender arranges the policy. Like every product of its kind, it protects the lender against your default, not you.
The premium is a percentage of the loan, set by how much of the price you borrow. CMHC's table charges 2.80% of the loan above 80% and up to 85% of the value, 3.10% up to 90%, and 4.00% up to 95%. Take a C$500,000 home with the minimum 5% down: the loan is C$475,000, the premium at 4.00% is C$19,000, and the mortgage you actually repay is C$494,000. The premium itself can go on the loan, which means you pay interest on it, but in Quebec, Ontario and Saskatchewan provincial sales tax is charged on the premium too and cannot be added to the loan, so that part is cash on closing day.
Insured loans have limits. The minimum down payment is 5% of the first C$500,000 and 10% of the part above it, and since 15 December 2024 insurance has been available on homes up to C$1.5 million, according to the Department of Finance. At C$1.5 million or more you need 20% down and the question does not arise.
Unlike American private mortgage insurance, the premium never stops: it is paid once and repaid with the loan. The Canadian mortgage calculator adds it to the loan when the deposit is under 20%, so it shows up in the monthly payment and the total interest rather than in the cash you need to complete.