Posted on Jul 19, 2018

Andrew Do, Realtor

by Brent Shepheard

Previously, mortgages fell into two classes; high-ratio and conventional.  There are now three classes of mortgages in Canada.  They are Insured, Insurable & Uninsurable Mortgages.

HIGH-RATIO VS CONVENTIONAL MORTGAGES

High Ratio Mortgage
less than 20% down
borrower pays CMHC fees.

Conventional Mortgage
20% down or more
The lender still insured the mortgage but the insurance fee was paid by the lender.

INSURED, INSURABLE & UNINSURABLE MORTGAGES

Insured Mortgage
less than 20% down
the client pays any CMHC fees
Property value below $1,000,000
max 25-year amortization
can’t be a rental property
The qualification rate is the Bank of Canada rate

Insurable Mortgage
Same as an insured mortgage but
the borrower has 20% or more down
No insurance paid by the borrower but the lender will likely insure the mortgage themselves
The property must be valued below $1,000,000
max 25-year amortization
can’t be a rental property. 

Uninsurable Mortgage
All mortgages that can’t be insured
rental properties
refinances or equity-take-outs
properties valued over $1,000,000
amortizations greater than 25 years.

HOW DOES THIS AFFECT YOUR INTEREST RATE?

The difference between interest rates varies greatly depending on what type of mortgage you have:

Insured Mortgages – lowest

Insurable Mortgages – slightly higher

Uninsurable Mortgages – highest rates

Therefore, borrowers who saved 20% or more for a down-payment are penalized with higher interest rates.
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