You do not necessarily need a 20% down payment to buy a home. Many Canadians purchase a home with considerably less.
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What Is a High-Ratio Mortgage?
When your down payment is less than 20% of the purchase price, your mortgage will normally be considered a high-ratio mortgage and will require mortgage default insurance. In other words, you are borrowing more than 80% of the property’s value, which is reflected in your loan-to-value (LTV).
$600,000 home
Down payment = $60,000
Mortgage = $540,000
LTV = 90%
High-ratio mortgage
20% down or more: generally not high ratio.
Less than 20% down: mortgage default insurance is generally required.
How Much Do You Need for a Down Payment?
For an insured mortgage, the current minimum down payment is 5% on the first $500,000 of the purchase price and 10% on the portion above $500,000. Department of Finance Canada explains the current insured-mortgage parameters. For a different regulatory scenario, read how Alberta separation could affect mortgage rules.
$700,000 home
5% of first $500,000 = $25,000
10% of remaining $200,000 = $20,000
Minimum down payment = $45,000
Government-backed high-ratio mortgage insurance is currently available on eligible residential purchases with a property value below $1.5 million. At $1.5 million or more, a high-ratio insured purchase is not available under these rules, so the borrower generally needs at least 20% down. Federal mortgage reforms effective December 15, 2024.
Why Is Mortgage Insurance Required?
This is probably the most misunderstood part: mortgage default insurance primarily protects the lender, not the homeowner. When you put less money down, the lender has less of an equity cushion if the mortgage goes into default, so the insurance reduces that risk.
You will sometimes hear people refer to this as “CMHC insurance,” but CMHC is not the only mortgage insurer in Canada. Sagen and Canada Guaranty also provide mortgage default insurance.
How Much Does Mortgage Insurance Cost?
The premium depends mainly on how much of the property’s value you are borrowing. For a standard insured mortgage with an amortization of 25 years or less, current CMHC premiums include:
| Loan-to-Value | Insurance Premium |
|---|---|
| 80.01%–85% | 2.80% |
| 85.01%–90% | 3.10% |
| 90.01%–95% | 4.00% |
The premium is calculated on the mortgage amount before the insurance premium is added, and it can normally be added to the mortgage rather than paid entirely out of pocket at closing. In Ontario, provincial sales tax on the mortgage-insurance premium cannot be added to the mortgage and must be paid separately. CMHC publishes the current premium schedule, and FCAC explains how the premium and provincial tax are paid.
Can a High-Ratio Mortgage Get a Lower Rate?
Yes. Because mortgage default insurance protects the lender, an insured mortgage can sometimes receive a lower rate than an uninsured mortgage. But the insurance premium is added to what you borrow, so your true borrowing cost is higher than the advertised rate alone suggests.
Sometimes the question is simply how much income you need for the home you want. I explain that in Salary vs House Prices.
$700,000 home
Minimum down payment: $45,000
Base mortgage: $655,000
CMHC premium at 4.00%: $26,200
Mortgage after financed premium: $681,200
This example assumes the minimum down payment and a 25-year amortization. Financing the insurance premium increases the mortgage principal; it does not change the contractual mortgage rate itself.
What About a 30-Year Amortization?
For insured mortgages, the standard maximum amortization is 25 years. Eligible borrowers can obtain a 30-year amortization when at least one borrower is a first-time homebuyer or the property is a new build. FCAC explains the current amortization rules.
A 30-year amortization lowers the required monthly payment by spreading repayment over a longer period, but you generally pay more interest over the life of the mortgage. CMHC currently applies a 0.20% premium surcharge when the amortization period is longer than 25 years. CMHC premium information.
High-Ratio Mortgages Have More Rules
High-ratio mortgages come with an extra layer of insurer rules. These can affect credit, GDS/TDS ratios, property type, occupancy, income verification, down-payment sources and residency status.
Self-employed borrowers and eligible non-permanent residents can still qualify for insured financing, but documentation and eligibility rules matter. CMHC allows alternative documentation in some self-employed files, while non-permanent residents must be legally authorized to work in Canada and the purchase must comply with the federal restrictions on residential purchases by non-Canadians. CMHC Self-Employed | CMHC Newcomers.
CMHC’s common homeowner programs use a minimum credit score of 600 for at least one borrower or guarantor and generally require owner occupancy for high-ratio homeowner financing. Insurer and lender rules can also vary by property type and number of units. A borrower who qualifies conventionally with 20% down may not necessarily qualify for a high-ratio insured mortgage. First-time purchasers can also review our Ontario first-time home buyer mortgage approval guide for income, debt-ratio and credit requirements.
Should You Always Put 20% Down?
Not necessarily. If you have enough cash for 20% down but also carry a car loan, line of credit or credit-card debt, it can sometimes make more sense to put less down and use some of the remaining cash to eliminate or consolidate that debt.
Lower monthly debt payments can improve your TDS ratio and sometimes help qualification more than simply increasing the down payment. The trade-off is a larger mortgage and an insurance premium, so both options should be compared.
The Practical Takeaway
A high-ratio mortgage is not simply a mortgage for someone who “doesn’t have enough down payment.” It is a different financing structure: you put less money down, mortgage insurance is added, and you borrow more. In exchange, you may be able to purchase sooner and may have access to very competitive insured mortgage rates.
The useful question isn’t simply “Can I put 20% down?” It is “Given my income, savings, purchase price and plans for the next few years, how much should I put down?”
Quick Summary
| High ratio | Less than 20% down |
| Insurance | Required; protects the lender |
| Minimum down | 5% first $500K + 10% above |
| Maximum insured price | Below $1.5 million |
| Insurance premium | Up to 4% at 90.01%–95% LTV |
| Rate | Can be lower because lender risk is insured |
| 30-year amortization | Available to eligible first-time buyers and new builds |
About the author: Jason Wodlinger is an Ontario Mortgage Agent Level 2. This article explains general Canadian insured-mortgage rules; final eligibility, pricing and insurer requirements depend on the borrower, property, lender and mortgage-insurance program.
