High-ratio mortgage
A mortgage with less than 20% down — requires default insurance from CMHC, Sagen, or Canada Guaranty. At CMHC the premium is 2.80% to 4.00% of the loan in the high-ratio range (up to 4.50% with a non-traditional down payment) and is usually added to the principal.
High-ratio sounds worse than it is. Because the loan is insured, the lender's risk is covered, so high-ratio mortgages often carry the lowest rates available — frequently beating a 20%-down conventional mortgage on rate.
The cost is the premium. At CMHC it's 4.00% of the loan at 90.01–95% loan-to-value, 3.10% at 85.01–90% and 2.80% at 80.01–85%. It's usually added to your principal, so you pay interest on it; in Ontario the provincial sales tax on the premium is paid in cash at closing.
High-ratio insurance is for purchases of owner-occupied homes priced under $1.5 million, with a maximum 25-year amortization (30 years for first-time buyers and new builds). A refinance can't be high-ratio insured. For many first-time buyers it's the fastest path into the market.
Sources
- CMHC mortgage loan insurance cost (CMHC)
- Boldest mortgage reforms in decades come into force today (Dec 15, 2024) (Department of Finance Canada)
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