High Ratio Mortgage
A high ratio mortgage is a mortgage with a downpayment of at least 5% and less than 20% of the purchase price of a home. Mortgage rates for high ratio mortgage borrowers who are typically first time homebuyers access the best mortgage rates because high ratio mortgages are insured against default. The insurance premium is always paid by the borrower and protects the lender. Canada's three mortgage default insurers are - CMHC, Genworth, and Canada Guaranty.
Interest rates are lower on righ ratio mortgages than on conventional mortgages and is usually the rates lenders advertise. Once the default insurance cost is added to a high ratio mortgage the overall cost is substantially higher.
The insurance premium can be paid up front by the borrower or added to the mortgage and amortized over the life of the mortgage.
Of note is the fact that during financial heardship of the borrower the insurer has a workout program to assist the borrowers.
The rate of a high ratio mortgage rate is lower than that of a conventional mortgage but the true cost of the mortgage is in the fees associated with high ratio or conventional mortgages. The high ratio cost is more when you calculate the insurance fee.