High Ratio or
Conventional Mortgage
Our expert advice will help you determine which mortgage type will increase your bottom line and maximize your total savings. We balance this out by also recommending the most comprehensive mortgage products that safeguard against costly penalties.
Conventional Mortgage (With Deposits of 20% or more)
A conventional mortgage is a loan that makes up no more than 80% of the purchase price or appraised value of the home depending on the transaction type. This type of mortgage does not have to be default insured. When purchasing a home with less than a 20% down payment, default insurance would have to be purchased at a premium of between 3.1% to 4.00% of the requested mortgage amount.
Pros:
1. Lowest mortgage interest payments over its lifetime
2. Mortgage default insurance not required
Cons:
1. Higher rates than high-ratio or insured mortgages
2. Larger down payment commitment required
High-Ratio Mortgage
(CMHC– Genworth– Canada Guaranty) Insured
A high-ratio mortgage is a loan that is above 80% Loan-to-Value and up to 95% of the purchase price or appraised value of the home, whichever is less. This means that your down payment requirement will be between 5%-19.99%.
Federal government regulations stipulate that these mortgages must be insured against default by either Canada Mortgage and Housing Corporation (CMHC), Genworth (GE) or Canada Guarantee (CG).
Pros:
1. Lower rates available for high ratio or insured mortgages
Cons:
1. Higher mortgage interest payments over its lifetime
2. You are required to pay the mortgage default insurance, which increases overall interest costs, as the premium is capitalized into the mortgage
