Conventional and high-ratio mortgages (insured)

Residential mortgages fall into two categories: conventional mortgages and high-ratio mortgages. A conventional mortgage is usually one in which the borrower makes a down payment of at least 20% of the property’s value and finances the remaining 80% or less.

A conventional loan does not normally need to be insured.

A high-ratio mortgage is one for which the borrower makes a down payment of less than 20% of the property’s value. If granted by a federally chartered institution, this loan, which covers 80% to 95% of the property’s value, must be insured in the event of default. Currently, high-ratio mortgages must be insured by one of the three major Canadian mortgage insurers: Canada Mortgage and Housing Corporation (CMHC), Canada Guaranty or Sagen (formerly Genworth Canada).

The insurance premium on a high-ratio mortgage is paid only once, at the time the funds are disbursed or provided to the borrower. Although the premium can be paid in full in advance, it is generally added to the amount of the loan.