Now on the market the best rate you can get is under Insured Mortgages (High Ratio) and Insurable Mortgages with 35% down-payment or more.

Here below I will try to explain all 3 options available to everyone based on the amount of your down-payment.

High Ratio Mortgage (Insured Mortgage)

Insured mortgages fall completely into mortgage insurance guidelines. They have:

1.  A down payment of less than 20%
2.  Amortizations  25 years or less
3.  A value under $1 million

When you take out an insured mortgage, you have to pay CMHC insurance premiums. The exact amount depends on the size of your down payment, and the more money you have upfront the less you have to pay in CMHC insurance.  Please see below the % insurance fee chart based on the downpayment available:

CMHC Premiums

 

On top of that, you need to pass a stress test, ensuring you can afford the mortgage if interest rates rise. If you’re applying for a fixed mortgage with a term of five years or more you need to qualify for the Bank of Canada’s posted rate, which is almost always higher than the rate homeowners apply for.

Insurable Mortgage

Insurable mortgages are very similar to insured mortgages, but the homebuyer has a down payment larger than 20%. In order to qualify for mortgage insurance, they must still have the following:

1.      Amortizations shorter than 25 years

2.      A value under $1 million

While you have to pay your own premiums on an insured mortgages, insurable mortgages become portfolio-insured. That means they become of a lender’s portfolio, which is insured on their dime. You get the benefit of having the lower rates of an insured mortgage but without having to pay for it yourself.

 

You might have diligently saved up a sizeable down payment but that does not mean the big banks will reward you for that. The interest rate on insurable mortgages is actually slightly higher than insured rates. The only exception are those with 35% downpayment or more.

Conventional Mortgage (Uninsured Mortgage)

Uninsurable mortgages fall outside of mortgage insurer’s qualifications for one reason or another. That could be because they:

a)      Have an amortizations of 30 years, or

b)      Have a home value of over $1 million, or

c)      Are a refinance, or an equity take-out greater than $200,000, or

d)      Are a rental

None of these disqualify you from getting a mortgage at all, unlike not meeting GDS or TDS requirements, but they do disqualify you from insuring those mortgages.

Because these mortgages are not insured (default insurance protects the banks not you) the risk is higher for the lender. As a result, the interest rates charged on uninsured mortgages are the highest.

Uninsured mortgages are backed by the lender or big bank. That’s why they have control over the qualifying criteria and interest rates.