What makes a mortgage conventional?

A mortgage is conventional when the down payment is 20% or more of the purchase price, giving a loan-to-value ratio of 80% or less. At that level, default insurance is not required.

Do I still need to pass the stress test?

Yes. Even with a conventional mortgage, you must qualify at the greater of your contract rate plus 2% or 5.25%. The stress test applies regardless of your down payment size.

Is a conventional mortgage cheaper than an insured one?

You avoid the insurance premium, which is a real saving, but insured mortgages sometimes carry slightly lower interest rates. Comparing total costs across lenders is the best way to know which is cheaper for you.

Mortgage Glossary

What is Conventional Mortgage?

A conventional mortgage is a home loan where the borrower puts down at least 20% of the purchase price. Because the down payment meets this threshold, the mortgage does not require default insurance. It is also called an uninsured or low-ratio mortgage and contrasts with a high-ratio mortgage.

Find my best mortgage Back to glossary

Quick answer

Also known as: uninsured mortgage, low-ratio mortgage

Key points

Requires a down payment of at least 20% of the purchase price
Has a loan-to-value ratio of 80% or less
Does not require mortgage default insurance
Saves the borrower insurance premium costs
Borrowers must still pass the federal stress test to qualify
Contrasts with a high-ratio mortgage, which needs insurance

Conventional Mortgage explained

A conventional mortgage is any mortgage with a loan-to-value ratio of 80% or less, meaning the down payment is 20% or more of the property value. At that level of equity, lenders consider the loan low enough risk that mortgage default insurance is not mandatory.

This differs from a high-ratio mortgage, where the down payment is under 20% and insurance from CMHC, Sagen, or Canada Guaranty is required. Conventional borrowers avoid insurance premiums but must still pass the federal stress test to qualify.

What a Conventional Mortgage is for

A conventional mortgage suits buyers who have saved a larger down payment and want to avoid paying mortgage insurance premiums. It signals lower risk to lenders and gives the borrower more equity in the home from day one.

How it can help you

Putting 20% or more down means no insurance premium added to your loan, which can save thousands over time. Lenderoo shops 40+ lenders for free, so you can compare conventional mortgage rates and terms side by side and find the most competitive financing for your equity position.

When it comes up

A buyer who has saved a substantial down payment chooses a conventional mortgage to skip insurance premiums, keep monthly costs lower, and build equity faster with a smaller loan relative to the home's value.

Example: A 20% down payment

Lin buys a home for $600,000 and puts down 20%, which is $120,000. Her mortgage is $480,000, giving a loan-to-value ratio of 80%.

Because she meets the 20% threshold, her mortgage is conventional and does not require default insurance. She avoids paying an insurance premium, though she still has to qualify under the stress test.