Conventional vs CMHC financing in Canada

The conventional path

A conventional mortgage is uninsured. The lender carries the risk, so it asks for more down, usually at least 20 percent on a rental. In exchange the path is simple: no insurance premium, no points to score, fewer rules. The lender checks your DSCR against a 1.20 threshold, meaning the property's net operating income has to cover the mortgage payment with a 20 percent cushion. If your deal clears that and you have the down payment, conventional is clean and fast.

The trade-off is that the larger down payment ties up more of your capital, and the standard amortisation keeps the monthly payment higher. On a tight deal, that higher payment can be the difference between positive and negative cash flow.

The CMHC path

A CMHC-insured mortgage adds insurance from the Canada Mortgage and Housing Corporation. That insurance changes what the lender can offer. The down payment can be smaller, the amortisation can stretch to 40 years on MLI Select, and the DSCR threshold drops to 1.10 instead of 1.20. The longer amortisation lowers the monthly payment, which lifts cash flow, and the lower threshold lets a tighter deal qualify.

The cost is the premium. CMHC insurance can add over $10,000 to a deal up front, as a Calgary investor noted: the premium can easily add ten thousand dollars or more to your numbers. So the CMHC path is not free. It is a trade: a premium now for better terms over the life of the loan.

The side-by-side that matters

• Down payment. Conventional needs more down. CMHC can need less, which frees capital for the next deal.
• DSCR threshold. 1.20 conventional, 1.10 on CMHC MLI Select. The lower threshold qualifies tighter deals.
• Amortisation. Standard on conventional, up to 40 years on MLI Select, which lowers the monthly payment.
• Premium. None on conventional, a real up-front cost on CMHC.
• Simplicity. Conventional is straightforward. CMHC MLI Select rewards points for energy, accessibility, and affordability.

How to choose on your deal

The honest answer is that there is no universal winner. Run both paths on the same property and compare the cash flow, the capital in, and the DSCR. If the deal clears 1.20 and you have the down payment, conventional is usually the cleaner choice. If it only cash flows with the lower DSCR threshold, a smaller down payment, or 40-year amortisation, the CMHC premium is likely worth it. The deal decides. That is why you want to see both numbers before you talk to your broker, not after.

Questions investors ask

What is the difference between conventional and CMHC financing?

Conventional financing is uninsured, needs a larger down payment, and uses a 1.20 DSCR threshold. CMHC-insured financing adds a premium but can allow a smaller down payment, a longer amortisation, and a lower DSCR threshold of 1.10 on MLI Select. Conventional is simpler; CMHC can make a tighter deal work.

Is CMHC financing cheaper than conventional?

Not up front. CMHC adds an insurance premium that can be over $10,000. But the lower down payment frees capital, and the longer amortisation lowers the monthly payment, which can improve cash flow enough to outweigh the premium. It depends on the specific deal.

Which financing path should I use?

Run both on the same property. If the deal clears a 1.20 DSCR and you have the down payment, conventional is the simpler path. If the deal needs the lower DSCR threshold, a smaller down payment, or 40-year amortisation to cash flow, CMHC is worth the premium. The numbers decide, not a rule of thumb.