Conventional vs. High-Ratio Mortgages Explained

Learn how each type will affect your overall costs.

Most consumers don’t know what their options are or even know that there are different types of mortgages you can qualify for.

We’ve broken it down for you so you can be well-informed when you meet with your lender for the first time.


Conventional Mortgage

A conventional mortgage is where the total loan amount does not exceed 80% of the appraised value or purchase price of the property, whichever is less.

The balance of the purchase price of the home is usually made up by a cash down payment. Mortgage insurance is usually not required for this type of mortgage.

For example:
Home purchase price: $350,000
Down payment: $70,000 (20% of purchase price)
Mortgage amount: $280,000


High Ratio Mortgage

With a high-ratio mortgage, the loan amount usually exceeds 80% of the appraised value of the property or the purchase price, whichever is less.

This type of mortgage is most popular with first-time homebuyers and must be insured by one of Canada’s residential mortgage insurers (such as Canada Mortgage and Housing Corporation or Sagen).

Mortgage loan insurance protects the lender, who will receive payment in the case of default by the borrower (i.e. if the borrower fails to pay the mortgage).

The cost of this type of insurance is in the form of a premium and is dependent on the mortgage amount and down payment amount (percent of the purchase price).

For example, a 5% down payment has a premium of 4%, a 10% down payment has a premium of 3.10%. This amount is usually added to the mortgage and repaid over the amortization period, but it can also be paid up front in a single lump sum.

Buying a home should be exciting, not scary. If you’ve still got questions, your lender is still your best resource and can work in conjunction with your real estate agent to make sure that you have all the information you need to make the right decision for your family.

Book an appointment with an Access Credit Union mortgage and lending specialist today to get started.

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