Why does a high-ratio mortgage need insurance?

With less than 20% down, the lender faces more risk because there is a smaller equity cushion. Canadian rules require default insurance on these loans to protect the lender, which makes the lending possible.

Who pays the mortgage insurance premium?

The borrower pays it, usually by adding the premium to the mortgage balance and paying it off over the amortization. The insurance itself protects the lender if you default.

How do I avoid a high-ratio mortgage?

Put down at least 20% of the purchase price. That makes the loan conventional, removes the insurance requirement, and lowers your overall borrowing.

Mortgage Glossary

What is High-Ratio Mortgage?

A high-ratio mortgage is a home loan where the down payment is less than 20% of the purchase price, meaning the borrower owes more than 80% of the home's value. In Canada, high-ratio mortgages must carry mortgage default insurance from CMHC, Sagen, or Canada Guaranty.

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Quick answer

Also known as: high ratio mortgage, insured high-ratio loan

Key points

A high-ratio mortgage has a down payment under 20% (loan-to-value above 80%).
Mortgage default insurance is mandatory, from CMHC, Sagen, or Canada Guaranty.
The insurance protects the lender, not the borrower, and the premium is added to the loan.
It lets buyers enter the market sooner with a smaller down payment.
Putting 20% or more down makes the mortgage conventional and avoids insurance.

High-Ratio Mortgage explained

A mortgage is high-ratio when the loan-to-value ratio exceeds 80%, that is, when the down payment is under 20%. Because the lender is taking on more risk with a smaller equity cushion, the law requires the loan to be backed by mortgage default insurance.

The insurance premium is added to the mortgage and protects the lender, not the borrower, if the borrower defaults. The trade-off for the borrower is that a high-ratio mortgage allows entry into the market with a smaller down payment, and insured high-ratio rates can sometimes be competitive because the lender's risk is covered.

What a High-Ratio Mortgage is for

High-ratio mortgages exist to let buyers purchase a home without saving a full 20% down payment. The required insurance makes lenders comfortable extending these larger loans relative to the home's value.

How it can help you

Understanding high-ratio rules helps you weigh buying sooner with a smaller down payment against saving more to avoid insurance. Lenderoo lets you shop 40+ lenders for free so you can compare insured high-ratio offers and find the best available rate.

When it comes up

A first-time buyer with a 10% down payment buys a home with a high-ratio mortgage. The default insurance premium is added to their loan, letting them enter the market years earlier than if they had waited to save the full 20%.

Example: a 10% down payment

You buy a $400,000 home with a 10% down payment of $40,000, leaving a $360,000 mortgage. Because your down payment is under 20%, this is a high-ratio mortgage and must be insured.

The insurer charges a premium based on your loan-to-value ratio, which is added to your mortgage balance and paid off over time. In exchange, you were able to buy with $40,000 down instead of the $80,000 that 20% would require.

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Questions & answers

High-Ratio Mortgage: frequently asked questions

Common questions Canadians ask about high-ratio mortgage.

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Related mortgage terms

Down Payment

The upfront cash payment made when purchasing a home

Read definition

Loan-to-Value Ratio (LTV)

The ratio of the mortgage amount to the property's value, shown as a percentage.

Read definition

Mortgage Insurance

Insurance that protects the lender if a borrower defaults on the mortgage.

Read definition

CMHC (Canada Mortgage and Housing Corporation)

Federal agency that provides mortgage loan insurance

Read definition

Conventional Mortgage

A mortgage where the down payment is at least 20% of the purchase price

Read definition

Back to full glossary

Understand your mortgage with confidence

Lenderoo shops 40+ lenders for free and pairs you with a mortgage professional who keeps the jargon simple — and gets you a great rate.

Find my best mortgage Explore the glossary

Mortgage Glossary

What is High-Ratio Mortgage?

Find my best mortgage Back to glossary

Quick answer

Also known as: high ratio mortgage, insured high-ratio loan

Key points

A high-ratio mortgage has a down payment under 20% (loan-to-value above 80%).
Mortgage default insurance is mandatory, from CMHC, Sagen, or Canada Guaranty.
The insurance protects the lender, not the borrower, and the premium is added to the loan.
It lets buyers enter the market sooner with a smaller down payment.
Putting 20% or more down makes the mortgage conventional and avoids insurance.

High-Ratio Mortgage explained

What a High-Ratio Mortgage is for

How it can help you

When it comes up

Example: a 10% down payment

You buy a $400,000 home with a 10% down payment of $40,000, leaving a $360,000 mortgage. Because your down payment is under 20%, this is a high-ratio mortgage and must be insured.

Have a question about high-ratio mortgage?

Lenderoo shops 40+ lenders for free and matches you with a mortgage professional who explains every term — and finds your best rate.

Get pre-approved free Talk to an expert

Questions & answers

High-Ratio Mortgage: frequently asked questions

Common questions Canadians ask about high-ratio mortgage.

Keep learning

Back to full glossary

Understand your mortgage with confidence

Lenderoo shops 40+ lenders for free and pairs you with a mortgage professional who keeps the jargon simple — and gets you a great rate.

Find my best mortgage Explore the glossary