What is High Ratio Mortgage Insurance?

High-ratio mortgage insurance is a type of insurance that protects lenders from default on high loan-to-value mortgages in Canada. It is required for home buyers who have a down payment of less than 20% of the property’s purchase price. The insurance provides lenders with the peace of mind that they will recover their investment in the event of a default by the borrower.

In Canada, high-ratio mortgage insurance is provided by the Canada Mortgage and Housing Corporation (CMHC), Genworth Canada and Canada Guaranty. These organizations offer mortgage insurance to lenders, which allows home buyers with lower down payments to secure financing.

High-ratio mortgage insurance premiums are typically paid by the borrower and added to the total mortgage amount. The premium rate varies depending on the size of the down payment and the loan-to-value ratio. The higher the loan-to-value ratio, the higher the premium.

One of the benefits of high-ratio mortgage insurance is that it allows home buyers with limited down payments to enter the housing market. This can be especially helpful for first-time home buyers who may not have considerable savings or investment accounts to use for a down payment.

In conclusion, high-ratio mortgage insurance protects lenders and enables home buyers with limited down payments to secure financing. It provides peace of mind for lenders and access to homeownership for borrowers.