If you have a high ratio mortgage (below 20% down payment, above 80% LTV), you will need CMHC mortgage default insurance in order to protect your lender if you default on your mortgage. This insurance guarantees payment if you stop making monthly mortgage payments. The Canadian government enforces this insurance to ensure the stability of the financial system.

Due to the lower risk, you'll receive the lowest mortgage rates with mortgage default insurance (and a lower down payment requirement).

However, some rules apply to qualify for mortgage default insurance in Canada: property purchase value not exceeding $1 million, a maximum amortization of 25 years, and meeting minimum credit score requirements. Without these requirements, you will need a down payment of at least 20%. This means you will need a conventional mortgage if you don't qualify for CMHC insurance.

As with any insurance, there is an added cost. In Canada, mortgage default insurance costs vary depending on your down payment percentage. However, the lower mortgage rates you receive often negate these added costs.