HIGH-RATIO MORTGAGE
If you have between 5% and 25% of the purchase price as your downpayment, you can apply for a high-ratio mortgage. Usually these have to be insured through CMHC (Canada Mortgage and Housing Corporation) or GE (GE Capital). These are mortgage insurance companies. Purchasing insurance is a common way of qualifying for a mortgage when you have less than 25% equity. The insurance premium is charged only once (per mortgage), when the mortgage funds are advanced. You can pay the premium yourself, but most people choose to add the funds on top of the mortgage.
Loan to Lending
Value Ratio Single
Advance
0 to 65%
65.1 to 75%
75.1 to 80%
80.1 to 85%
85.1 to 90%
90.1 to 95% | 0.50%
0.75%
1.25%
2.00%
2.50%
3.75% |
Please note: Insurance premiums are higher when there is more than one advance. This usually happens if you are building your house or having it built for you. Check with your mortgage broker to learn what the applicable premiums will be.
The insurance premium is calculated by multiplying the mortgage amount needed by the applicable percentage.
For example:
If the purchase price is $112,000 and the required mortgage is $100,000. You divide 100,000 by 112,000. This equals 89.29%. Looking at the above chart - the premium is 2.50% when the lending ratio is 89.29%.
The next step is to multiply the mortgage amount by the insurance premium. Using our example this means $100,000 X 2.50% = $2,500. Your actual mortgage loan will therefore be $102,500.
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