Financing costs
Ontario 8% PST on mortgage default insurance
By Bo Yu, Broker, Right at Home Realty, Brokerage · Verified/updated August 2026
Ontario applies 8% retail sales tax to insurance premiums, and mortgage default insurance is one of them. The tax is calculated on the premium, not on the mortgage or the purchase price.
The reason it matters more than its size suggests: the premium gets financed, the tax on the premium does not. Buyers who budgeted for "CMHC gets added to the mortgage" are the ones who find an unplanned four-figure item on their lawyer's statement.
- Who charges it
- The Government of Ontario, collected by the insurer through your lender and remitted at closing.
- Who normally pays
- The borrower.
- When it's paid
- On closing day, through your lawyer.
- Cash or financed
- Cash. Lenders will not capitalize the tax into an insured mortgage.
- Typical range
- 8% of the insurance premium — roughly $1,000–$2,500 on a typical high-ratio Ottawa purchase
How it's calculated — and why it varies
Tax = 8% × the mortgage default insurance premium. If there is no premium — 20% or more down — there is no tax.
- $610,000 mortgage at 4.00% premium = $24,400 premium → $1,952 in tax.
- $500,000 mortgage at 3.10% premium = $15,500 premium → $1,240 in tax.
- $450,000 mortgage at 2.80% premium = $12,600 premium → $1,008 in tax.
- A longer amortization raises the premium by 0.20%, which raises the tax with it.
Exemptions, refunds and when it doesn't apply
- No premium, no tax — a 20% down payment removes both.
- Provinces differ: Ontario, Quebec, Saskatchewan and Manitoba tax default-insurance premiums; most others don't. Ottawa buyers pay it; a buyer across the river in Gatineau faces Quebec's own rules.
- There is no rebate or refund of this tax.
- It is separate from HST and does not appear on the HST portion of any statement.
A real Ottawa example
The $650,000 Barrhaven purchase with $40,000 down: the $24,400 premium is financed, but $1,952 in Ontario tax goes on the lawyer's trust ledger with the land transfer tax and legal fees.
That single line is the most common reason a first-time buyer's cash-to-close comes in higher than they planned.
How this shows up in the calculator
The calculator shows "PST on default insurance premium (8%)" as a cash closing cost whenever a premium applies, and keeps the premium itself out of the cash total — the note under the cash panel spells the split out.
Open the calculatorOfficial sources — verified/updated August 2026
Rules and rates change. These are the first-party pages this one was checked against; confirm anything that matters to your purchase directly with them.
Every figure on this page is a planning estimate for general information only, based on the assumptions shown, and are not legal, tax, mortgage or financial advice or an offer of credit. Actual rates, payments, taxes, fees and values vary — confirm the numbers with your lender, lawyer or accountant before relying on them. Full disclosures.
This page is general information about how a cost works in Ontario, not legal, tax, mortgage or accounting advice, and not a quote. Your lawyer, lender and accountant confirm what actually applies to your purchase.
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