Once upon a time we had high ratio vs. conventional mortgages, now they are Insured, Insurable or Uninsurable.
How it Was Then
High ratio mortgage – down payment less than 20%, insurance (aka CMHC insurance) paid by the borrower.
Conventional mortgage – down payment of 20% or more, the lender had a choice whether to insure the mortgage or not at their own expense.
How it is Now
Insured –a mortgage transaction where the insurance premium is or has been paid by the client. Generally, a down-payment below 20%.
Insurable –a mortgage transaction that is portfolio-insured at the lender’s expense for a property valued at less than $1MM that fits insurer rules (qualified at the Bank of Canada benchmark rate over 25 years with a down payment of at least 20%).
Uninsurable – a mortgage that is ineligible for insurance. Examples of Uninsurable are refinances, single unit rentals (rental buildings with 2-4 units are Insurable), purchases/transfer for properties greater than $1MM, equity take-out mortgages greater than $200,000, any mortgage with an amortization greater than 25 years.
So what does this mean when you need a mortgage for a purchase or when you have a maturing mortgage you want to transfer?
- If it was originally insured (borrower paid default insurance – aka CMHC insurance), we can get insured rates (lowest rate tier).
- If it was originally back-end insured by the lender (basically the same as being conventional) we can get insurable rates (2nd lowest rate tier).
- If the mortgage was placed before October 17, 2016, we can grandfather the insurable rates even if it was a $1 million+ value house and/or with a 30-year amortization. It then depends if it was insured (borrower-paid insurance) or conventional as to whether you qualify for insured or uninsurable rates.
- If it was placed after October 17, 2016 and the property was over a $1MM value or had a 30-year amortization, we can only get uninsurable rates (highest rate tier).
For insurable rates we need to consider the current loan to value and the beacon score.