The $1.5 Million Insured Mortgage Cap, Explained

The $1.5 Million Insured Mortgage Cap, Explained

Short answer: For insured purchases closing under the new rules since December 15, 2024, the maximum home price eligible for mortgage default insurance is $1.5 million, up from $1 million. A $1.3 million home that once required $260,000 down (20%) can now be bought with about $105,000 down (8.1%) plus an insurance premium. The tradeoff: insured rates and rules apply, a premium is added, and at $1.5 million exactly the old world returns in one step.

The insured price cap is one of those housing rules that sounds technical and lands like a truck. For nearly a decade, $1 million was the hard ceiling: pay a dollar more and the insured market closed to you, 20% down or nothing. In Toronto and Vancouver, where a modest detached home blew past $1 million years ago, that meant the insured system effectively did not exist for a large share of family homes. The December 2024 change did not make $1.3 million homes cheap. It made them purchasable with a deposit closer to what the rest of the country puts down. This piece explains exactly what moved, and what did not.

What an insured mortgage is, in one paragraph

When you put less than 20% down, Canadian law at federally regulated lenders requires mortgage default insurance. The insurer (CMHC or a private insurer, Sagen or Canada Guaranty) protects the lender if you default; you pay the premium. Insured mortgages historically carried lower interest rates than uninsured ones because the lender's risk is covered, they must pass the stress test, and until recently they were capped at 25-year amortizations and a $1 million purchase price. The December 15, 2024 package moved two of those four boundaries: price cap to $1.5 million, and 30-year amortizations for first-time buyers and new-build buyers (see our 30-year amortization guide).

The before and after, in dollars

Take a $1.3 million purchase, a normal family-home price in much of the GTA and Metro Vancouver.

• Before December 15, 2024: uninsurable. Minimum down payment $260,000. No premium, conventional rules.
• Today: minimum down payment is $25,000 (5% of the first $500,000) + $80,000 (10% of the remaining $800,000) = $105,000. The loan is $1,195,000 at about 91.9% loan-to-value, so the CMHC premium band is 4.00% of the loan, roughly $47,800, normally added to the mortgage balance. In Ontario, the 8% provincial sales tax on that premium (about $3,800) is cash at closing, not added to the loan.

So the rule change cut the cash-to-close by roughly $150,000 at this price point, at the cost of a premium of roughly $48,000 financed over the amortization plus interest on it. Whether that trade is good depends on the alternative: if the alternative was renting for four more years while saving, the premium may be the cheaper door. If the alternative was a $1.05 million home with 20% down, the cheaper home may still win on total cost. The cap change expands the option set; it does not pick the option for you. Our down payment rules guide has the full price ladder.

Who actually benefits

Move-up buyers in $1M-$1.5M markets. The prior owners of a condo or townhouse with $120,000 to $180,000 of equity were previously stuck: too much home for the insured system, too little cash for 20%. They are the clearest winners.

First-time buyers with high incomes and modest savings. A household earning enough to pass the stress test on a $1.2 million home but holding $100,000, not $240,000, can now transact. Combined with a 30-year amortization, the payment side got easier at the same time as the cash side.

New-build buyers. Presale closings in the $1M-$1.5M band that were written assuming insured financing under the old ambiguity now have a clean rule, plus 30-year amortization eligibility on new construction.

Who does not benefit: buyers above $1.5 million (unchanged), and investors. Insured mortgages are for owner-occupied homes (small multi-unit owner-occupied has its own rules); this change does not open insured leverage for pure rental purchases.

The cliff is still there, just moved

At $1,499,999 the minimum down payment is about $125,000 and insurance is mandatory. At $1,500,000 and above insurance is unavailable and the minimum is 20%, or $300,000 at exactly $1.5 million. Crossing the line by one dollar raises the minimum cash requirement by roughly $175,000. Practical consequences:

• Listings strategically priced at $1.499 million are not only marketing; they sit inside the insured world.
• If your budget straddles the line, run the qualification math both ways. A home at $1.52 million needs $304,000 down but carries no premium; a home at $1.48 million needs about $123,000 down plus a premium around $53,000 financed. The total cost of ownership can favour either, but the cash-to-close is wildly different.
• Appraisals matter more near the cap. If you pay $1.49 million and the appraisal comes in at $1.52 million, your insured structure can collapse at the finish line. Lenders lend on the lower of price and appraised value.

What did not change

The stress test still applies in full: insured borrowers qualify at the higher of contract rate plus 2% or the federal floor. Amortization for insured loans is 25 years unless you are a first-time buyer or buying a new build (30 years). The premium schedule did not change; our CMHC premium guide has the current table. And the $1.5 million cap is a price cap, not a loan cap; the insurance attaches to the property transaction, which is why the down payment formula, not the mortgage size, is the planning number.

Why the government moved the cap

The official rationale was housing access in high-price markets: the $1 million cap had not moved since 2012-ish era pricing in the largest cities (the cap dates to the 2012 tightening), while prices in Toronto and Vancouver roughly doubled over the surrounding decade. The policy intent was to restore the insured system's relevance for ordinary homes in expensive cities without touching the 20% world above $1.5 million. Critics noted the obvious: letting buyers put 8% down on a $1.3 million home also supports prices at exactly the segment where affordability is worst. Both readings can be true. Our job here is the arithmetic; the arithmetic says the option exists now, it costs a premium, and the cliff at $1.5 million disciplines anyone shopping near it.

Planning checklist if you are buying between $1M and $1.5M

1. Confirm your down payment by the blended formula (5% of first $500K + 10% of the rest), not by "5 percent." The guide at down payment rules has the table.
2. Price the premium at your LTV band and add the provincial tax on it if you are in Ontario, Quebec or Saskatchewan. Our closing costs guide for Ontario sizes the full stack.
3. If you are a first-time buyer, model the 30-year amortization; the payment difference can decide whether the stress test passes.
4. Get the appraisal risk in writing from your broker before removing conditions near the cap.
5. Compare honestly against the 20%-down scenario on a slightly cheaper home. The premium is a real five-figure cost; sometimes the cheaper home plus no premium is the better balance sheet.

The $1.5 million cap is the single most consequential mortgage-rule change for buyers in expensive cities in a decade, precisely because it converts "impossible without $260,000" into "possible with $105,000 and a premium." Use the conversion deliberately.

Citations: Department of Finance Canada, changes to insured mortgage rules effective December 15, 2024: insured price cap increased to $1.5 million; 30-year amortizations extended to first-time buyers and new-build buyers (canada.ca). CMHC mortgage loan insurance premium schedule and provincial sales tax treatment (cmhc-schl.gc.ca).