When financing a multifamily property in Canada, you face a fundamental choice: CMHC-insured or conventional financing. Each path offers distinct advantages and trade-offs that affect your returns, cash flow, and portfolio growth capacity.
This isn’t a simple “cheaper is better” comparison. The right choice depends on your deal, your capital situation, and your long-term strategy.
Understanding the Two Paths
CMHC-Insured Financing
Canada Mortgage and Housing Corporation provides mortgage insurance for multifamily rental properties with five or more units. This insurance protects the lender against default, enabling them to offer better rates and terms.
CMHC insurance requires an upfront premium (under the July 2025 risk-based pricing model, base premiums run roughly 2.5%-6.0%+ of the loan amount with a 0.25% surcharge per 5-year amortization extension above 25 years; MLI Select projects earn 10-30% point-based discounts) but unlocks significant benefits. For a deep dive into the program’s full advantages, read about CMHC MLI Select for multifamily investors.
Conventional Financing
Conventional multifamily financing involves borrowing without mortgage insurance. Lenders bear the full default risk, which affects the rates and terms they offer.
Conventional financing avoids insurance premiums but typically requires more equity and charges higher interest rates.
Side-by-Side Comparison
| Feature | CMHC-Insured | Conventional |
|---|---|---|
| Down payment | As low as 15% | Typically 25-35% |
| Interest rates | Lower (insured discount) | Higher (risk premium) |
| Amortization | Up to 40-50 years | Typically 25 years |
| Insurance premium | 2.5%-6.0%+ base (10-30% MLI Select discount; +0.25% per 5-yr amort extension >25 yrs) | None |
| Application process | More rigorous | Varies by lender |
| Property requirements | Must meet CMHC standards | Lender-specific |
| Prepayment flexibility | More restrictive | Varies |
On a $2 million building, the down payment difference between 15% and 35% is over $400,000 in capital — book a free strategy call with LendCity to find out which path keeps more cash working for you.
Choosing the wrong lender or term can quietly erode your returns — book a free strategy call with LendCity and we’ll walk you through the numbers.
When CMHC-Insured Financing Wins
Lower Down Payment, More Leverage
CMHC insurance allows down payments as low as 15% on eligible multi-family mortgage financing compared to 25-35% for conventional. On a $2 million apartment building, that’s the difference between $300,000 and $500,000-$700,000 in equity required.
That freed-up capital can acquire additional properties, fund renovations, or maintain reserves. For investors focused on scaling their portfolio, leverage efficiency matters.
Better Interest Rates
CMHC-insured mortgages typically carry rates 50-150 basis points lower than conventional alternatives. On a $1.5 million mortgage, a 1% rate difference saves approximately $15,000 annually in interest.
Over a five-year term, that rate advantage often exceeds the insurance premium cost, making CMHC financing cheaper overall despite the upfront premium.
Extended Amortization
CMHC programs offer amortization periods up to 40 or even 50 years—significantly longer than conventional’s typical 25 years. Longer amortization reduces monthly payments, improving cash flow and debt coverage ratios.
A $1.5 million mortgage at 4.75% costs approximately $8,550 monthly over 25 years versus $7,150 monthly over 40 years. That $1,400 monthly difference ($16,800 annually) directly improves cash flow.
MLI Select Benefits
CMHC’s MLI Select program offers additional incentives for properties meeting affordability, accessibility, or energy efficiency criteria—potentially reducing premiums and increasing leverage further.
When Conventional Financing Wins
Avoiding the Insurance Premium
On a $2 million property with 85% financing, CMHC insurance at 5.5% costs $110,000. That’s real money. If you have adequate equity and the rate differential is small, conventional financing avoids this upfront cost entirely. (Note: MLI Select projects may qualify for tiered discounts reducing this cost.)
For investors with substantial equity from refinanced properties, savings, or partners, conventional financing may cost less overall.
Faster, Simpler Process
CMHC applications require detailed documentation including environmental assessments, property condition reports, and affordability analyses. The process can be lengthy.
Conventional lenders may process applications faster with fewer documentation requirements. When deal timing is critical, conventional speed has value.
Greater Property Flexibility
CMHC has specific property eligibility standards. Properties needing significant work, those in certain locations, or non-standard configurations may not qualify.
Conventional lenders may finance properties CMHC won’t insure. For value-add investors buying properties below CMHC standards with plans to improve them, conventional financing provides access. Consider reading about how to finance multifamily properties in Canada for the full spectrum of options.
Prepayment Flexibility
Some conventional lenders offer more generous prepayment privileges. If you plan to pay down the mortgage aggressively, sell the property, or refinance within the term, conventional terms may provide more flexibility without penalties.
If you’re buying a value-add property that doesn’t meet CMHC standards yet, conventional financing with a later CMHC refinance could be the play — book a free strategy call with us and we’ll model both scenarios.
Your debt ratios, income type, and property plans all affect what you qualify for — schedule a free strategy session with us so we can map out a strategy that works for your goals.
Running the Numbers
The only way to choose definitively is to model both options with your specific deal numbers.
Calculate total cost of borrowing for each option including insurance premiums, interest rate differentials, and any lender fees. Compare five-year and ten-year total costs.
Model cash flow under each scenario. CMHC’s lower payments may make a tight deal workable or turn a good deal into a great one.
Run your numbers through the MLI Select Calculator to see how CMHC terms affect your maximum loan amount and monthly payments.
Consider opportunity cost of additional equity required for conventional financing. Capital trapped in one property can’t be deployed elsewhere. If that capital would earn returns in another investment, the effective cost of conventional financing increases.
Factor in your growth plans. If you’re building toward a larger portfolio, capital efficiency through CMHC financing accelerates growth even if individual deal costs are similar.
Which Investors Choose Which
CMHC-insured financing tends to attract investors who are scaling aggressively and need capital efficiency, whose properties meet CMHC eligibility criteria, who prioritize cash flow optimization through extended amortization, and who are comfortable with longer application processes.
Conventional financing tends to attract investors with substantial equity seeking simplicity, those buying value-add properties that don’t meet CMHC standards yet, investors wanting prepayment flexibility, and those with relationships with commercial lenders offering competitive conventional terms.
Key Takeaways:
- Understanding the Two Paths
- Side-by-Side Comparison
- When CMHC-Insured Financing Wins
- When Conventional Financing Wins
- Running the Numbers
Frequently Asked Questions
Can I switch from conventional to CMHC financing later?
Does CMHC insurance cover the investor if the property fails?
What property types qualify for CMHC multifamily insurance?
Is the CMHC insurance premium tax deductible?
How long does CMHC approval take compared to conventional?
Making Your Choice
Neither option is universally superior. CMHC financing optimizes for leverage and cash flow. Conventional financing optimizes for simplicity and flexibility.
Model both options with your actual deal numbers. Consider not just the immediate costs but how each choice affects your broader portfolio strategy. The best financing serves your long-term investment goals, not just the individual transaction. Visit our multi-family mortgage financing page to see how we structure both CMHC and conventional deals for investors.
If you’re looking to compare commercial financing options across different property types beyond multifamily, working with a broker who knows the full landscape of programs can help you evaluate all available paths. For multifamily specifically, work with a mortgage professional experienced in multifamily financing who can present both options with realistic numbers for your specific situation.
Disclaimer: LendCity Mortgages is a licensed mortgage brokerage. Content on this page is for educational purposes only and does not constitute legal, tax, investment, securities, or financial-planning advice. Rates, premiums, program terms, and regulations referenced are as of the page's last updated date and are subject to change. Any investment returns, rental yields, tax savings, or case-study figures shown are illustrative only — they are not guaranteed, not typical, and individual results will vary. Consult a licensed lawyer, Chartered Professional Accountant, or registered dealer before acting on any information above.
Written by
LendCity
Published
January 30, 2026
· Updated April 26, 2026Reading time
7 min read
CMHC Insurance
Mortgage default insurance from Canada Mortgage and Housing Corporation. For 1-4 unit investment properties, investors must put 20%+ down (no insurance available). However, CMHC offers MLI Select for 5+ unit multifamily properties, and house hackers can access insured mortgages with 5-10% down.
Conventional Mortgage
A mortgage with 20% or more down payment, not requiring default insurance. This is the standard financing type for investment properties in Canada, as high-ratio (insured) mortgages aren't available for pure rentals.
Amortization
The period over which a mortgage is scheduled to be fully paid off through regular payments of principal and [interest](/glossary/interest-rate). In Canada, common amortization periods are 25 or 30 years, though the mortgage term (when you renegotiate) is typically 1-5 years. A longer amortization lowers monthly payments, improving [cash flow](/glossary/cash-flow) but increasing total interest paid.
Cap Rate
Capitalization Rate - the ratio of a property's [net operating income (NOI)](/glossary/noi) to its current market value or purchase price. A 6% cap rate means the property generates $60,000 NOI annually on a $1,000,000 value. Used to compare investment properties regardless of financing. See also [DSCR](/glossary/dscr) and [Cash-on-Cash Return](/glossary/cash-on-cash-return).
Down Payment
The upfront cash payment when purchasing a property. For 1-4 unit investment properties, minimum 20% down is required. 5+ unit multifamily can use CMHC MLI Select with lower down payments, and house hackers can put as little as 5% down on owner-occupied 2-4 plexes. Your down payment directly affects your [LTV](/glossary/ltv) and the amount of [leverage](/glossary/leverage) you use.
CMHC MLI Select
A CMHC program offering reduced mortgage insurance premiums and extended amortization (up to 50 years) for multifamily properties with 5+ units that meet energy efficiency or accessibility standards. Popular among investors scaling into larger apartment buildings.
Cash Flow
The money left over after collecting rent and paying all expenses including mortgage, taxes, insurance, maintenance, and property management. Positive cash flow is the primary goal of buy-and-hold investors. See also [NOI](/glossary/noi), [Cash-on-Cash Return](/glossary/cash-on-cash-return), and [Vacancy Rate](/glossary/vacancy-rate).
Equity
The difference between a property's current market value and the remaining mortgage balance. If your home is worth $500,000 and you owe $300,000, you have $200,000 in equity. Equity builds through mortgage payments, [appreciation](/glossary/appreciation), and [forced appreciation](/glossary/forced-appreciation). See also [LTV](/glossary/ltv) and [Refinancing](/glossary/refinancing).
Leverage
Using borrowed money (mortgage) to control a larger asset, amplifying both potential returns and risks on your investment. A higher [LTV](/glossary/ltv) means more leverage. See also [Down Payment](/glossary/down-payment) and [Equity](/glossary/equity).
Multifamily
Properties with multiple dwelling units, from duplexes to large apartment buildings. Often offer better cash flow and economies of scale.
Value-Add Property
A property with potential to increase value through renovations, better management, rent increases, or adding units.
Refinance
Replacing an existing mortgage with a new one, typically to access equity, get a better rate, or change terms. Investors commonly refinance to pull out capital for purchasing additional properties (cash-out refinance) while retaining ownership of the original property.
Interest Rate
The cost of borrowing money, expressed as a percentage. It determines how much you pay on top of the principal borrowed. Interest rates directly affect monthly payments, [cash flow](/glossary/cash-flow), and [DSCR](/glossary/dscr). See also [Amortization](/glossary/amortization).
Prepayment Privileges
Terms in your mortgage that allow extra payments without penalty, typically 10-20% of the original balance annually. Helps pay off your mortgage faster.
Energy Efficiency
The effectiveness with which a property uses energy for heating, cooling, lighting, and other functions. Energy-efficient upgrades to rental properties reduce operating costs, increase NOI, and can add significant property value while qualifying for government rebates.
Mortgage Insurance Premium
The fee charged by CMHC or other insurers for mortgage default insurance on high-ratio mortgages. The premium is calculated as a percentage of the loan amount and can be added to the mortgage balance or paid upfront.
Mixed-Use Property
A building that combines residential and commercial uses, such as retail on the ground floor with apartments above. Mixed-use properties can diversify income streams and may qualify for commercial financing terms.
Insured Mortgage
A mortgage backed by mortgage default insurance from CMHC, Sagen, or Canada Guaranty, required when the down payment is less than 20% on owner-occupied properties. The insurance premium — which currently ranges from roughly 0.60% to 4.50% of the mortgage amount depending on loan-to-value band, and is higher for non-traditional down payments or extended amortization — is typically added to the loan balance. Insured mortgages often qualify for lower interest rates because the lender's risk is covered by the insurer. Confirm the current premium schedule with CMHC/Sagen/Canada Guaranty; rates and tiers are subject to change.
Uninsured Mortgage
A mortgage without government-backed default insurance, required when the down payment is 20% or more, or for investment properties and refinances. Uninsured mortgages typically carry slightly higher interest rates than insured ones because the lender bears the full default risk. Most investment property mortgages in Canada are uninsured.
Hover over terms to see definitions. View the full glossary for all terms.