Insured vs. uninsured mortgages
Key Takeaways
1. An insured mortgage – also referred to as a high-ratio mortgage or transactionally-insured mortgage – must satisfy the following criteria: a purchase price under $1 million, a maximum amortization period of 25 years, a down payment less than 20%, and the property must be owner occupied. As of December 15, the maximum purchase price will increase to $1.5 million for all insured borrowers, and the amortization will extend to 30 years for first-time home buyers.
2. An insurable mortgage has a down payment of 20% or greater, but must fall within a maximum purchase amount of $1 million, and an amortization period of 25 years.
3. An uninsured mortgage is one where a minimum 20% down payment is made. The borrower is not required to take out mortgage default insurance. Uninsured mortgages can be used for investment or secondary properties that do not need to be owner-occupied, and can have an amortization period of up to 30 years.
Breaking news: Canadian mortgage reform update
On September 16, 2024, the federal government announced sweeping changes to mortgage qualification rules for first-time home buyers, as well as those purchasing newly-constructed homes.
As of December 15, 2024:
- 30-year amortizations will be available for all first-time home buyers, regardless of whether they have an insured mortgage. These extended amortizations are also available for any purchase of new construction.
- The maximum purchase price for an insured mortgage (where less than 20% down is paid) will be increased to $1.5 million, from the current $1 million.
These are some of the most impactful mortgage reforms announced since 2012, and are anticipated to increase first-time home buyers’ affordability and access to the housing market.
Learn more about these new mortgage rule changes on the Ratehub.ca blog
Qualifying factors for insured, insurable and uninsured mortgages
| High ratio (insured) | Insurable | Uninsured | |
| Down payment | 5% - 19.99% | 20% or more | 20% or more |
| Home purchase price | Less than $1 million | Less than $1 million | $1 million or more |
| Loan to value ratio (LTV) | Greater than 80% | 80% or less | 80% or less |
| Maximum amortization period | 25 years | 25 years | 30 years |
| Insured requirement | Mandatory | Optional | Not available |
| Insurance is purchased by: | Borrower | Lender | N/A |
| Impact on the borrower | The risk profile of the borrower is reduced because the chance of default is now backed by insurance. This allows lenders to provide lower mortgage rates. | The borrower has greater equity in the home. Lenders can opt to take out insurance on the mortgage to further hedge risk of default. The mortgage rate may be higher than an insured option, but less than an uninsured one. | Insurance cannot be taken out on the mortgage, meaning the lender shoulders all the risk. The mortgage rate offered to the borrower will be higher to reflect this. |
Insured vs. uninsured mortgages: Frequently asked questions
When is mortgage insurance required?
How much is the mortgage insurance premium, and how is it paid?
Can I avoid mortgage insurance?
Can I switch from an insured mortgage to an uninsured one?
Which type of mortgage is most common?
Are insured mortgages stress tested?
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Your guide to uninsured and insured mortgages
What is an insured vs. uninsured mortgage?
An insured mortgage is a loan that requires mortgage default insurance (CMHC insurance), due to the lower level of equity the borrower holds in their home. A mortgage must be insured if the buyer makes a down payment less than 20% when purchasing their home. They are also limited to a 25-year maximum amortization period, and the home’s purchase price must be below $1 million. The property must also be owner-occupied, meaning the buyer must dwell within it as their principal residence.
An uninsured mortgage applies to loans where the buyer has paid more than 20% down. Because they have a larger proportion of equity in their home, these home buyers are not required to take out mortgage default insurance, and can amortize their mortgage up to a maximum of 30 years. Uninsured mortgages can be taken out on properties that are not the buyers’ principal residence, such as rental or vacation homes. Refinanced mortgages must also be uninsured.
What is an insurable mortgage?
An insurable mortgage covers all the same criteria as an insured high-ratio mortgage, except the borrower has paid more than 20% down. This gives the lender the option to insure the mortgage through back-end insurance, and bundle the mortgage into an investment for additional profit. Unlike with an insured mortgage, the mortgage holder does not pay the insurance premiums as they are covered by the lender.
Because these mortgages can be insured, they are considered to pose less risk to the lender; the borrowers must also meet all the criteria set out by the insurer, such as a healthy credit score, and a minimum 80% loan-to-value ratio. This gives the lender room to price these mortgages more attractively – usually in a range between their insured and uninsured mortgage product pricing.
Also read: Should you always save a 20% down payment when buying a home?
How are mortgage premiums calculated?
Mortgage premiums are determined based on the size of your down payment, and resulting loan-to-value ratio; the higher this ratio, the larger your mortgage premium will be. The smallest possible premium charged by the CMHC is 0.6%, for LTVs up to and including 65%. The largest premium charged is 4%, for LTVs between 90.1% to 95%.
| Loan-to-Value | Premium on Total Loan |
| Up to and including 65% | 0.60% |
| 65.01% to 75% | 1.70% |
| 75.01% to 80% | 2.40% |
| 80.01% to 85% | 2.80% |
| 85.01% to 90% | 3.10% |
| 90.01% to 95% | 4.00% |
- A minimum 5% down payment is required for properties priced at $500,000 or less.
- If the home costs between $500,000 and $999,999, the buyer must pay 5% on the first $500,000, and then 10% on the remainder.
- If the home costs $1,000,000 or more, the buyer must put at least 20% down.
Who provides mortgage insurance in Canada?
Mortgage default insurance is offered by three main providers:
- The CMHC, which is a Crown Corporation that manages the provision of housing supply in Canada. This corporation provides roughly 30% of all mortgage default insurance in Canada.
- And two private companies, Canada Guaranty and Sagen
All of the providers charge the premiums based on the size of your down payment and total mortgage amount; whichever insurer you end up with usually depends on which one your lender or broker prefers.
Also read: CMHC insurance in your province