PST on CMHC insurance
If you don’t save enough to make a down payment of 20% or more on a home, you will need to purchase mortgage default insurance. More commonly known as CMHC insurance, mortgage default insurance protects your lender in the event that you ever had to default on your mortgage. While CMHC insurance can quickly add up to thousands of dollars, it’s not a cost you need to pay for upfront. Instead, CMHC insurance is added to your mortgage and paid off over the life of your loan.
There is, however, one cost associated with CMHC insurance that you may need to pay for with cash. Several provinces charge Provincial Sales Tax, or PST, on CMHC premiums. The PST will be charged with your CMHC premiums. Here are the provinces that require this, and the tax rate they charge:
- Ontario (8%)
- Quebec (9%)
- Saskatchewan (6%)
Manitoba previously charged PST on CMHC premiums but removed the tax in 2020, as part of its relief package for the COVID-19 pandemic.
For example, if your CMHC insurance premium amounts to $6,200 and you live in Ontario, the PST on your CMHC insurance would be:
$6,200 (CMHC Insurance Premium)
x 8.00% (PST in Ontario)
= PST on CMHC Insurance: $496
In this example, you would have to pay $496 for the PST on your CMHC insurance, on closing day.