Understanding High Ratio Mortgages in Canada

If you’ve been house hunting or talking to a mortgage broker (hi, that’s me!), you’ve probably heard the term “high ratio mortgage” thrown around. But what is a high ratio mortgage in Canada, exactly—and why should you care?

Whether you're buying your first home or upgrading to something new, this is one of those mortgage terms that can significantly affect your approval process, monthly payment, and even the type of home you can afford. So, let’s break it all down, without the jargon.

What Is a High Ratio Mortgage in Canada?

A high ratio mortgage in Canada is when you buy a home with less than 20% down. This is pretty straightforward, right?

However, there's more to understand. In Canada, if your down payment is under 20%, your mortgage is deemed high ratio. You are required to obtain mortgage default insurance (also known as CMHC insurance). This insurance protects the lender in case you default on your mortgage. It doesn't protect you; it secures the lender’s investment. Still, this insurance makes low-down-payment home buying possible.

So, if you’re putting down 5%, 10%, or 15%, you’re getting a high ratio mortgage. Yes, that default insurance premium is included in your mortgage total unless you pay it upfront.

How Much Is the Insurance on a High Ratio Mortgage?

The cost of insurance varies based on your down payment. Here’s the breakdown as of 2025:

• 5% down: 4.00% premium on the mortgage amount.

• 10% down: The premium reduces to 3.10%.

• 15% down: It goes further down to 2.80%.

  
  

The less you put down, the more mortgage default insurance you will pay. It’s tiered, so every bit of extra down payment can save you money on premiums.

Let’s be honest: nobody enjoys paying insurance premiums. However, this system allows Canadians to buy homes with just 5% down. Without it, many buyers, especially first-timers, would be priced out of the market.

Do You Always Need 20% Down in Canada?

Nope! That’s one of the biggest mortgage myths I encounter.

If the purchase price is under $1.5 million, the minimum down payment is:

• 5% on the first $500,000

• 10% on the amount between $500,000 and $1,499,999

  
  

For example, let’s say you’re buying a $700,000 home. You’d need 5% on the first $500,000 ($25,000) and 10% on the remaining $200,000 ($20,000). That totals to $45,000, which is just under 6.5% of the total purchase price.

If you buy a home over $1.5 million or a rental property, the minimum down is 20%. This scenario would be classified as a conventional mortgage, not a high ratio one.

Is a High Ratio Mortgage Bad?

Not at all. It simply means you're using mortgage default insurance to buy with a smaller down payment. For many individuals, especially first-time buyers or people in pricey markets, this option is vital for entering homeownership.

In some instances, high ratio mortgages can even offer lower interest rates compared to conventional ones. Why? Because the insurance reduces the lender’s risk.

So, while you are paying a premium for that default insurance, you might save on your interest rate. It’s not merely a better or worse option; it’s about what fits your situation.

Can You Refinance a High Ratio Mortgage?

Refinancing a high ratio mortgage is complicated.

To refinance (i.e., to increase the amount or pull equity out), you need at least 20% equity in your home. This requirement means you’d need a conventional mortgage for a full refinance.

If you began with a high ratio mortgage and have built up equity through payments and property value increases, you may qualify for refinancing—but this depends on your current loan-to-value (LTV) ratio.

What Happens If My Down Payment Is a Gift?

Gifted down payments are acceptable in high ratio mortgage scenarios. However, the gift must come from an immediate family member, must be non-repayable, and requires a signed gift letter. Lenders typically want to see that the funds are deposited into your account at least 15 days before closing.

If you're planning on using gift funds and buying with less than 20% down, it’s crucial to loop your mortgage broker in early. We’ll help ensure everything is documented accurately, preventing last-minute surprises.

Final Thoughts: What Is a High Ratio Mortgage in Canada—and Should You Consider One?

In summary: A high ratio mortgage in Canada is where you’re putting down less than 20%, and you will need mortgage default insurance to facilitate the purchase.

It’s not a negative option. In fact, it helps many people attain homeownership sooner than anticipated. However, it comes with extra costs and rules, so understanding how it works and what options are available is essential.

Are you uncertain if a high ratio mortgage is right for your situation? Let’s chat. I’ll review your numbers, help you weigh the pros and cons, and find the mortgage strategy that suits you best—not just the one that pops up in a Google search.

Let's Chat!

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