Comparison chart showing insured vs uninsured mortgage options and their long-term costs.

A Smaller Mortgage Isn’t Always the Biggest Win

Written by Leanne Mollica, Mortgage Broker — My Mortgage Strategy

Somewhere along the way, Canadians adopted the idea that the smallest possible mortgage is always the smartest financial move. That a lower balance automatically equals less cost. That default insurance is always bad. And that putting down the biggest down payment you can afford is always the responsible thing to do.

It makes sense why it feels true. Mortgages are emotional. They’re tied to safety, financial security, and wanting to “get ahead” as fast as possible.

But here’s the reality:

A smaller mortgage does not automatically mean a better financial outcome.

And in many cases, paying a default insurance premium or choosing a higher mortgage balance at a lower rate can save you money and protect your future goals.

Let’s break down why.

Why the “smallest mortgage” mentality misleads borrowers

Most Canadians compare mortgages by looking at the balance—not the total cost over time. But that number alone doesn’t tell the full story.

The true cost of a mortgage is influenced by:

  • Interest rate
  • Amortization
  • Loan-to-value
  • Cash-flow needs
  • Insurance premiums
  • Your upcoming life plans
  • Your need for savings or liquidity

When you compare only the ending balances, you’re comparing apples to oranges. What matters is what the mortgage costs you over the life of the loan—not how big or small it looks on paper.

This is why a slightly larger mortgage at a lower rate can cost thousands less than a smaller mortgage at a higher rate. And yes, this can still be true even after adding a default insurance premium.

Opportunity Cost: The factor most Canadians miss

Every dollar you commit to your mortgage is a dollar you cannot use anywhere else in your financial life.

That dollar can’t:

  • Pay off higher-interest debts
  • Stay in your savings buffer
  • Support upcoming major expenses (renovations, health treatments, fertility, parental leave, vehicle replacement)
  • Grow in investments
  • Go toward retirement or education planning
  • Strengthen your emergency fund
  • Provide breathing room for cash flow

If your mortgage rate is around 4%—but:

  • Your line of credit is 10%
  • Your credit cards are 19%+
  • Your investment portfolio averages 6–8%

…then aggressively paying down your mortgage or maximizing your down payment is often the least strategic option.

A real example: 19% vs. 20% down

If a borrower is deciding between:

  • 19% down with an insured rate (e.g., 4.04%)
  • 20% down with an uninsured rate (e.g., 4.49%)

Human instinct is:
“Put more down. Smaller mortgage = better.”

But the math often shows the opposite.

Even with the insurance premium added, the insured mortgage frequently has:

  • Lower monthly payments
  • Lower total interest
  • Lower overall cost
  • More remaining savings
  • More flexibility for unexpected life expenses

This is exactly why the “smallest balance is best” mindset does not always lead to the best outcome.

Strategic borrowing vs. emotional borrowing

Rather than focusing on the question:
“How do I get the smallest mortgage possible?”

Start asking:
“Which mortgage structure best supports my life and my financial health?”

Because sometimes:

  • Paying extra is wise.
  • Keeping cash in savings is wiser.
  • Choosing an insured mortgage gives you the better rate.
  • Choosing flexibility is more valuable than lowering the balance.
  • Preserving capital protects future goals better than squeezing everything into a down payment.

There is no universal answer that fits every borrower.

There is, however, a strategy that fits your life.

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