Once upon a time it was fairly easy to answer the question “what rate will I qualify for?” Back then higher down-payments resulted in lower interest rates on your mortgage. Now neither of those are the case.
Once upon a time you either had a high ratio or a conventional mortgage.
Now you will have an insured, or insurable or uninsurable mortgage. The reference to insurance is what most people understand as a high ratio mortgage insured by CMHC, Genworth or Canada Guaranty.
Once Upon a Time:
- High ratio mortgage – down payment less than 20%, with insurance (aka CMHC fees) paid by the borrower.
- Conventional mortgage – down payment of 20% or more, and the lender had a choice whether to insure the mortgage or not at their own expense.
Now it is more complicated:
- Insured – Most often a down-payment or refinance equity below 20%. A mortgage transaction where the insurance premium is or has been paid by the borrower, which often means a high ratio mortgage.
- Interest rates are the lowest in the range.
- Insurable – Fits all the same guidelines as an insured mortgage but the borrower has more than 20% for a down payment. A mortgage transaction that is often portfolio-insured at the lender’s expense. Property must be valued at less than $1MM that fits insurer rules and is qualified at the Bank of Canada benchmark rate over 25 years with a down payment of at least 20%. Property cannot be a Rental. The loan-to-value and your FICO (credit) score will determine what rate you qualify for.
- Interest rates are slightly lightly higher than insured rates.
- Uninsurable – All mortgages that can’t be insured. Examples include refinances, single unit rentals (rentals between 2-4 units are insurable), purchases and transfers for properties with valued at over $1MM, equity take-out’s greater than $200,000, amortizations greater than 25 years.
- Interest rates are at the higher end of the range, and are determined based on loan-to-value (LTV) %.
What does this mean when it comes to shopping for best rates and terms when your mortgage matures and you have the opportunity to move it to another lender?
- If your mortgage was originally insured (borrower paid insurance), we can get insured rates.
- If your mortgage was originally back-end insured (basically the same as being conventional) we can get insurable rates.
- If your mortgage was placed before October 2016, we can grandfather the insurable rates even if it was a $1 million+ value house or 30 year amortization. It then depends if it was insured (client paid insurance) or conventional as to whether we get insured or uninsurable rates now.
- If your mortgage was placed after October 2016 and the property value was over a $1 million or the mortgage had a 30 year amortization, we are restricted to uninsured rates.