Insured vs. Uninsured Mortgage Rates in Alberta
Short answer
Insured mortgages (down payment under 20%) require mortgage default insurance and often carry slightly lower interest rates because the insurer reduces lender risk. Uninsured mortgages (20%+ down) skip insurance premiums but may have slightly higher rates on comparable terms. Total cost depends on the rate spread versus the insurance premium — compare both scenarios.
The plain-English version
When you put less than 20% down on a purchase price under $1.5 million, the mortgage must be insured through CMHC, Sagen, or Canada Guaranty. The premium is added to your loan balance (or paid upfront). Insured mortgages are limited to 25-year amortization and must meet insurer and stress-test rules. Lenders sometimes offer lower rates on insured files because default risk is transferred.
Uninsured mortgages with 20% or more down avoid the insurance premium and may allow 30-year amortization on some files. Rates can be marginally higher because the lender holds more risk. On expensive homes or long amortization preferences, uninsured may still win on total cost despite a slightly higher rate.
Alberta-specific considerations
- Alberta first-time buyers often use insured mortgages with 5%–10% down — compare the insurance premium against any rate discount.
- No Alberta provincial transfer tax helps cash flow, but insurance premiums still add to your borrowed amount on high-ratio files.
- Rental properties and refinances generally cannot be insured — those files are uninsured with different rate sheets.
Example scenario
Purchase price $400,000 with 10% down ($40,000). Mortgage $360,000 plus CMHC premium near $11,160 (planning estimate at standard tier) equals roughly $371,160 insured balance at 5.09%. Same buyer with 20% down borrows $320,000 uninsured at 5.29%. The insured file has a larger balance but a lower rate — run both through the payment calculator to compare monthly and total cost.
Common mistakes to avoid
- Comparing only rates without including the insurance premium in the insured scenario.
- Assuming insured always costs less total — at some rate spreads, 20% down wins.
- Forgetting insured mortgages cap at 25-year amortization.
- Believing insurance protects you as the borrower — it protects the lender; you still owe the full balance if you default.