High Ratio Mortgages

In Canada, high ratio mortgages have proven to be very important in the role of making homes affordable. What’s different about high ratio mortgages are the fact that the downpayment on the home can be less than 20%. However, due to the increased risk for the bank, a mortgage insurance becomes mandatory. high ratio mortgages are especially popular in Canada because they empower individuals who may not have access to the funds necessary for a 20% downpayment, to be able to afford their homes. High ratio mortgages have played a crucial role in growing Canada’s population to what it is today, if you are interested in a high ratio mortgage, Smarter Loans is able to help you acquire one in the way that best fits you.

In Canada, if you are interested in a high ratio mortgage, then there are still many different options that you’ll need to consider before you find the one that best fits your unique needs. As you are connecting with the right mortgage company, you should have a pretty great chance of securing a high ratio mortgage that works for you. We know that your situation and set of needs are unique, so if you are interested in a high ratio mortgage, Smarter Loans has taken the initiative of creating a directory below that includes all of the top lenders for high ratio mortgages which you can access by simply scrolling down.

If you’ve had a chance to scroll through the directory and compare the terms, rates and offers for high ratio mortgages, then simply click “apply now” in order to proceed to a brief online application for your high ratio mortgage. You can also alternatively pre-apply with Smarter Loans and in that case, we’ll ensure that you get paired up with a high ratio mortgage that’s fitted for your unique needs.

We can help connect you with the top high-ratio mortgage and other types of mortgage providers in Canada.

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Top High Ratio Mortgages Providers in Canada

Company
Amount
Interest Rate
Reviews
Terms
$50,000 and Up
Varies
Varies
$50,000 - Unlimited
Varies
Varies
$50,000 - Unlimited
Varies
Varies
$50,000 - Unlimited
Varies
Varies
$10,000 - $25,000
Varies
12 - 60 months
$50,000 - $100M
Varies
Varies

What is a High Ratio Mortgage and How Does it Work?

 

A high ratio mortgage lets you purchase a home if you have less than a 20% down payment. If your mortgage is high ratio, you must qualify for mortgage default insurance through one of the three mortgage default insurance providers – Genworth, CMHC or Canada Guaranty.

A high ratio mortgage is different from a conventional or low ratio mortgage, when you purchase a home with a down payment of 20% or greater. In this instance, you aren’t required to pay mortgage default insurance.

The minimum down payment on a low ratio mortgage is as low as 5%. The amount you’re required to put down depends on the purchase price of the property. When the purchase price is $500,000 or less, you can put 5% down. When the purchase price is above $500,000, but below $1,000,000, you can put 5% down on the first $500,000 and 10% down on the remaining portion. (If you’re buying a home with a purchase price of $1,000,000 or above, the purchase price is too high to be insured, therefore, you’re required to make a down payment of at least 20%.)

What is Mortgage Default Insurance?

Mortgage default insurance doesn’t protect you similar to other types of insurance like home insurance, it protect your lender. Your lender is protected in case you fail to repay your mortgage according to its terms and conditions. For that reason, lenders tend to be able to offer more attractive interest rates on high ratio mortgages compared to conventional mortgages.

When it comes to mortgage default insurance, you have two choices. You can choose to pay it as a lump sum when your mortgage funds or you can have it added to your mortgage loan amount and paid over the life of your mortgage. Most homebuyers choose the latter, as most simply don’t have the funds to pay for the mortgage default insurance upon closing.

The amount of mortgage default insurance premiums you’re required to pay depends on the size of your down payment. The closer your mortgage payment is to 20%, the less costly your mortgage default insurance premiums will be.

Mortgage default insurance premiums in Manitoba, Quebec, Ontario and Saskatchewan are subject to PST. You’ll be required to pay the PST amount upon closing. The PST can’t be added to your mortgage loan amount, so it’s important to set money aside to pay them as part of your closing costs.

Why You Might Choose a High Ratio Mortgage

 

The main benefit of choosing a high ratio mortgage is that you can buy a property now instead of waiting until you’ve saved up a 20% down payment. This can be especially advantageous in hot real estate markets like Toronto and Vancouver where home prices tend to go up faster than you can save.

Low ratio mortgages tend to come with lower mortgage rates than conventional mortgages. That’s because mortgage default insurance providers protect lenders in the event that the borrower defaults, meaning less risk for the lender.

By The Numbers

Between 2015 and 2018, 53% of first-time homebuyers made a down payment of less than 20%.

 

Source: Mortgage Professionals Canada

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Types of High Ratio Mortgages offered:

  • First Mortgage
  • Residential Mortgage
  • Second Mortgage
  • Commercial Mortgage
  • Mortgage Refinancing
  • Home Equity Line of Credit
  • Fixed Rate Mortgage
  • Debt Consolidation
  • Variable Rate Mortgage
  • Cashback Mortgage
  • First Time Homebuyers
  • Construction Mortgage
  • Self Employed Mortgages
  • Bridge Financing

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