WHAT IS A HIGH-RATIO MORTGAGE?
A high-ratio mortgage refers to a mortgage in which the borrower has a down payment between 5% – 20%. These Mortgages require mortgage default insurance. This program allows individuals to be able to put down as little as 5% down payment on a new home purchase. The Canadian government supports high levels of home ownership through an insurance plan that covers lenders in the event that holders of high-ratio mortgages default on their mortgage.
IN CANADA, THERE ARE 3 MAIN SUPPLIERS OF INSURANCE FOR HIGH-RATIO MORTGAGES:
- CMHC – Canada Mortgage and Housing Corporation’s mortgage insurance program allows buyers who have as little as a 5% down payment to secure mortgages at the same rates as those who make a 20% down payment. The mortgage default insurance premium, which is passed on to the borrower, can either be paid up front as a lump sum or be added to the mortgage.
- Genworth – Financial Canada is a private default insurance provider. As a leading private sector supplier of mortgage default insurance in Canada, Genworth works with lenders to make home ownership more accessible to Canadians.
- Canada Guaranty – Established in 2010, Canada Guaranty is a Canadian-owned private mortgage insurance company. Mortgage insurance from Canada Guaranty protects lenders and investors from losses related to borrower default and foreclosure.