A high-ratio mortgage is a Canadian mortgage with a high loan-to-value ratio, commonly created by a down payment below 20% and generally requiring mortgage default insurance.
A high-ratio mortgage is a Canadian residential mortgage with a high loan-to-value ratio and relatively little borrower equity at origination. In common home-purchase usage, a down payment below 20% creates an LTV above 80% and generally requires mortgage default insurance under applicable lender and program rules.
The ratio compares mortgage principal with property value. It does not describe a high monthly payment, high interest rate, high home price, or high debt-to-income ratio.
For a purchase mortgage, a basic LTV calculation is:
If the purchase price and accepted lending value are both $750,000 and the borrower pays $60,000 down, the base mortgage is:
The initial LTV before a financed insurance premium is:
Because the borrower contributes 8% and finances 92%, this is a high-ratio mortgage in ordinary Canadian usage.
Assume the insurer quotes a 4.00% premium for the specific eligible scenario. The premium is calculated on the base mortgage:
If the premium is added to the mortgage, the financed balance becomes:
| Component | Amount |
|---|---|
| Purchase price | $750,000 |
| Down payment | $60,000 |
| Base mortgage | $690,000 |
| Base LTV | 92.00% |
| Illustrative insurance premium | $27,600 |
| Mortgage after financed premium | $717,600 |
The premium rate is an illustration based on the cited CMHC example, not a universal quote. Product, down payment, amortization, occupancy, insurer, and effective-date rules affect pricing and eligibility. Provincial sales tax on an insurance premium, where applicable, may have separate payment treatment.
Mortgage default insurance transfers specified lender credit risk to the insurer, subject to the policy. It supports lending at higher LTVs that would otherwise expose the lender to a smaller collateral cushion.
It does not:
The lender normally arranges the coverage. The premium is commonly passed to the borrower, either paid at closing or added to the mortgage if permitted.
| Feature | High-ratio mortgage | Lower-ratio or conventional mortgage |
|---|---|---|
| Typical purchase down payment | Below 20% | At least 20% |
| Initial LTV | Above 80% | 80% or lower |
| Default insurance | Generally required | May not be legally required, but lender can still require it |
| Borrower equity | Lower at origination | Higher at origination |
| Premium | Usually applicable | May be absent or lender-paid under some arrangements |
| Program rules | Insurer and government-backed eligibility rules | Lender and prudential rules still apply |
Terminology can vary across institutions. OSFI describes non-conventional, or high-ratio, loans as having higher LTV and less origination equity and generally requiring mortgage insurance.
A sufficient minimum down payment does not establish approval. Underwriting can also consider:
Insurer approval and lender approval are separate decisions. A lender can apply standards stricter than a program minimum.
At 92% LTV, an 8% price decline would approximately eliminate the original down-payment equity before transaction costs and principal repayment. That does not automatically cause default, but it can limit refinancing or sale options.
A mortgage can move out of high-ratio territory as principal is repaid or property value rises, but the original insurance contract and premium do not automatically disappear merely because current LTV falls. Current LTV also depends on a reliable property value, not an unsupported estimate.
Separate purchase price, down payment, base mortgage, insurance premium, and final financed amount. Do not calculate the premium on an already premium-increased balance unless the insurer’s method explicitly requires it.
Model a larger down payment against retaining emergency reserves. Include the insurance premium, mortgage rate, amortization, closing costs, and opportunity cost rather than focusing only on whether 20% can be reached.
Purchase-price limits, minimum down payments, eligible amortizations, premium rates, and qualification rules can change. Use current insurer and federal sources for the actual transaction date.
Approval ratios do not capture every household cost. Test mortgage payments, property tax, heating, insurance, maintenance, condominium charges, transportation, childcare, and other essential spending.
This material is educational and is not individualized mortgage, insurance, legal, tax, or financial advice. Current lender, insurer, and government rules control.