The amount of your down payment will determine whether you'll have a conventional mortgage or a high-ratio mortgage, which must be insured.
What's the difference?
- Conventional mortgage: means your down payment is 20% of the purchase price or more.
- High-ratio mortgage: means your down payment is less than 20% of the purchase price.
Effective February 15, 2016, the minimum down payment for new mortgages have been modified. The new breakdown is as follows:
- For homes with a purchase price less than or equal to $500,000 the minimum down payment is 5%
- For homes with a purchase price greater than $500,000 and less than $1 million, the minimum down payment is 5% of the first $500,000 plus 10% of the remaining balance
- For homes with a purchase price of $1 million or more, the minimum down payment is 20%
High-ratio mortgages must be insured by a mortgage insurer such as the Canada Mortgage and Housing Corporation (CMHC), Genworth Financial Canada or Canada Guaranty. You will be required to pay the premium for this insurance.
The insurance premium:
- Will depend on the amount you are borrowing and the percentage of your down payment. Usually, mortgage default insurance premiums range between 0.6% and 4.50% of the mortgage amount
- Can be paid at the time of purchase, or added to the principal amount of your mortgage.