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%.)