Conventional vs High-Ratio Mortgage

When you apply for a mortgage in Canada, your loan falls into one of two camps: conventional or high-ratio. The dividing line is simple — your down payment. Put down 20% or more and you have a conventional mortgage with no default insurance. Put down less and you have a high-ratio mortgage that must be insured. Here's what each means for your costs and your options.

Key takeaways

• A conventional mortgage means a down payment of 20% or more — no mortgage default insurance required.
• A high-ratio mortgage means a down payment under 20% and must carry CMHC (or equivalent) insurance.
• CMHC premiums range from 4.00% (5%–9.99% down) to 2.80% (15%–19.99% down) of the mortgage and are added to the loan.
• In Ontario you also pay 8% PST on the insurance premium at closing.
• Both types must pass the mortgage stress test with federally regulated lenders.

The 20% dividing line

The difference between a conventional and a high-ratio mortgage is entirely about how much you put down relative to the purchase price. A conventional mortgage covers 80% or less of the home's value — meaning you've put down at least 20%. A high-ratio mortgage covers more than 80% — meaning your down payment is under 20%. Because the lender is taking on more risk with a smaller down payment, high-ratio mortgages must be insured against default. New to all of this? Start with how mortgages work in Canada.

Remember that Canada has minimum down payment rules: 5% on a home under $500,000; 5% on the first $500,000 plus 10% on the portion above for homes from $500,000 to $1,499,999; and 20% on homes of $1,500,000 or more. So any home priced at $1.5M+ is automatically conventional, because it can't be insured. See how much down payment you need for the full breakdown.

What high-ratio mortgage insurance costs

If you go high-ratio, you'll pay a mortgage default insurance premium — most often through CMHC. The premium is a percentage of your mortgage amount, and the less you put down, the higher the rate. The premium is added to your mortgage, so you finance it over time rather than paying it up front.

Ontario PST on the premium

In Ontario, you pay 8% PST on the insurance premium at closing — and unlike the premium itself, the PST can't be added to the mortgage. Budget for it as a closing cost. Calculate yours with the HOMEH CMHC calculator.

Which one costs less?

It's a genuine trade-off. A high-ratio mortgage lets you buy sooner with less cash up front, but you pay the insurance premium. A conventional mortgage avoids the premium entirely but requires a much larger down payment. Here's an illustrative comparison on a $500,000 mortgage.

Counter-intuitively, insured (high-ratio) mortgages sometimes get slightly lower interest rates than conventional ones, because the lender's risk is covered. The right choice depends on how much cash you have and how soon you want to buy.

Both must pass the stress test

Whether your mortgage is conventional or high-ratio, a federally regulated lender will apply the mortgage stress test. You must qualify at the greater of your contract rate plus 2% or the 5.25% benchmark floor — proving you could still afford payments if rates rose. Learn more in what is the mortgage stress test, and keep your debt-service ratios in mind: aim for GDS at or under 39% and TDS at or under 44%.

How HOMEH helps you keep more

Whichever type of mortgage you choose, the commission side of your purchase is where real savings live. HOMEH gives eligible buyers the industry's highest Cashback Rebate — money that can offset a CMHC premium, your closing costs, or your moving budget. Sellers list for 1%, or free when they also buy with HOMEH within 6 months, or $395 + HST with a Mere Posting.

Put cashback toward your costs

Estimate your rebate with the HOMEH cashback calculator, then see what you can afford with the affordability guide.