The high ratio mortgage is a mortgage product that applies to mortgage applicants looking to finance more than 75% of the value of their home.  These high ratio products can range from 75% to 95% of the actual purchase price or the fair market appraisal value determined for your home, whichever of the two is lower.

In order to secure a high ratio or high leverage mortgage, the borrower must qualify and pay for home mortgage insurance.

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In Canada, there are three providers of home mortgage insurance.  The first and most commonly known insurer is the Canada

Mortgage and Housing Corporation or CMHC.  This is a crown corporation of the Canadian Federal Government.  The second source for mortgage insurance in Canada comes from private insurer, Genworth.

The reason for the need for insurance is due to the higher risk of potential loss to the lender.  At higher loan to property value ratios, the probability of lender losses are higher and must be covered off by insurance before a lender will provide a mortgage.

Once in place, the insurance covers off any potential loss than may be incurred by a lender in the event of a foreclosure action brought on by a borrower in default.

The insurance is paid for by the borrower as well and effectively becomes a cost of borrowing in addition to the stated interest rate on the mortgage.

Once again, for mortgage amounts less than or equal to 80% of the property value, no insurance is required.  At the time of writing, the preimums associated with different mortgage ratios were as follows.

For mortgages between 80% and 85%, the required insurance premium is one percent of the mortgage value.

For mortgages between 85% and 90%, the required insurance premium is is one and three quarters of a percent of the mortgage value.

For mortgages between 90% and 95%, the required insurance premium is two percent of the mortgage value.

The Canada mortgage insurance program is an excellent solution for helping a larger percentage of Canadians own a home.

At the same time,   the insurance companies will use qualified appraisers who may provide a more conservative estimates of value.   So even if the insurance covers up to 95% of the real estate value,  if the appraised value comes back substantially less than you expected, you still may not be able to secure a large enough mortgage to meet your requirements.
If you are in need of a high ratio mortgage, I recommend that you give me a call so that I can quickly outline your options and help you chose a mortgage product that’s right for you.

Click Here To Speak Directly To Mortgage Specialist Joe Walsh.

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