High Ratio Mortgage

High Ratio Mortgage

A high ratio mortgage is a mortgage in which a borrower places a down payment of less than 20% of the purchase price on a home. Another way of phrasing a high ratio mortgage is one with a loan to value ratio of more than 80%. A mortgage with more than a 20% down payment is called a conventional mortgage.

A high ratio mortgage will require mortgage insurance. Mortgage insurance is usually purchased by the lender through one of Canada’s three default insurers, the Canada Mortgage and Housing Corporation (CMHC), Genworth and Canada Guarantee and the cost of the premium is charged to the buyer as a closing cost, or is financed through the mortgage.

What is Down payment?

The buyer must pay the down payment from his/her own funds or other eligible sources before securing a mortgage. The portion of the home price that is not financed by the mortgage loan.

What is Mortgage payment?

A regularly scheduled payment that is often blended to include both principal and interest. This payment can be made weekly, bi weekly or monthly depending upon the bank and what have you negotiated.

What are Property taxes?

The taxes are property taxes your community levies based on a percentage of the value of your home. The tax is generally used to help finance the cost of running your community, say to build schools, roads, infrastructure and other needs. You must pay property taxes even if you don't need an escrow account and even after your mortgage is paid off.

What is a Mortgage?

Nowadays, a mortgage involves an agreement between a lender and a borrower where the lender decides to loan the borrower money to purchase property under the condition that the borrower promises to repay the loan and provides that land as security for their payment of the loan; when the loan is repaid in full, the lender will release the property to the borrower.

What can I use as my down payment?

For those home buyers who have saved up a down payment, traditional mortgage loan insurance products require home buyers to provide the minimum down payment from their own resources, however gift down payments from immediate relatives are also acceptable.

What is Flex down product?

Additional sources of down payment are also available through CMHC's Flex Down product. With Flex Down, home-buyers with a proven track record in managing their debt can provide the five per cent down payment from a variety of sources, including borrowed funds or lender incentives, provided the funds are at arm's length from and not tied to the purchase or sale of the property.

When does my bank need mortgage loan insurance?

Typically lenders will require mortgage loan insurance if a borrower has a down payment of less than 20 per cent of the purchase price of the home. By protecting lenders against borrower default,

Who arranges Hi ratio Mortgage Loan Insurance?

Your bank will arrange for the purchase of hi ratio mortgage Loan Insurance. When you negotiate your loan terms make sure to ask that the mortgage be CMHC insured.

Does CMHC Mortgage Loan Insurance only apply to traditional single-family residential properties?

No, CMHC offers mortgage loan insurance products on various property types including duplexes, condominiums, owner-occupied properties, manufactured or mobile homes, properties requiring renovations and much more, including rental and nursing homes.

Who pays for the CMHC Mortgage Loan Insurance?

Like any other kind of insurance, there are premiums to be paid. The lender typically passes on the cost of insurance to the borrower. The premiums can be paid up front in a lump sum or blended in with your mortgage loan payments.

 Is there an upper limit to the price of a house I can buy with a minimum payment?

Not any more. As of September 2003, CMHC removed its price ceiling limitations. For the purposes of qualifying for CMHC Mortgage Loan Insurance, CMHC does not have a limit on the purchase price of a property.

Can you refinance your home to make some renovations?

If your Bank refinances your mortgage using CMHC Mortgage Loan Insurance, you can increase the existing mortgage on your home up to 90 per cent of its current value or as improved value. Refinanced funds may be used for any purpose you wish, except default management.

Is CMHC Mortgage Loan Insurance available for secured lines of credit?

Yes. With a secured line of credit, you can draw funds up to your insured credit limit (up to 80 per cent of the current or as improved value of your home) at any time without the need to re-apply, and you can also make interest-only payments for a period of time. Equally important, you have the flexibility to prepay without penalties.

My mortgage is currently CMHC-insured and I am moving to another house. Are there any CMHC products available to me?

When a lender has received CMHC Mortgage Loan Insurance on your home loan on or after April 1, 1996 and you are purchasing another home, there may be a mortgage portability option. Portability allows the repeat user of CMHC insured mortgage financing to save money by reducing or eliminating the premium on a new insured loan for the purchase of another home.

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The above information is provided as a guideline and is not intended to give a professional legal advice. Please consult a real estate lawyer for their opinion on your particular case.

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Navtaj Chandhoke
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