A high-ratio mortgage applies to people that have less than 20% of a down payment to put towards the purchase of a home. In these cases, you must qualify for mortgage insurance through one of three insurers – Genworth, CMHC or Canada Guaranty
You can qualify for up to 95% of your home’s value based on the following criteria:
Amortization (25 years)
How to calculate your minimum down payment?
Typically a minimum down payment is starting at 5%. For a purchase price of $500,000 or less, the minimum down payment is 5%. When the purchase price is above $500,000 and under $1,000,000, the minimum down payment is 5% for the first $500,000 and 10% for the remaining portion.
Example: If your purchase price is $750,000, the minimum down payment is
5% * $500,000 = $25,000; 10% * ($750,000 – $500,000) = $25,000; And the total downpayment is $25,000 + $25,000 = $50,000.
The cost of the insurance premium (a fee) is incorporated into your mortgage payments and varies based on your down payment:
With a down payment of 5% – 9.99% your premium is 4.00% of your mortgage amount
With a down payment of 10% – 14.99% – your premium is 3.10% of your mortgage amount
With a down payment of 15% – 19.99% – your premium is 2.80% of your mortgage amount
The insurance premium is also subject to PST and must be paid at time of closing
How does this benefit consumers?
First time home buyers are the more typical consumer that fall into the “High Ratio Mortgage” category.
High-Ratio mortgages allow first-time home buyers the opportunity to own a home assuming they have good credit and steady income; but do not have a big down payment available.