What Is a High Ratio Mortgage? — Vishal Monga — Akal Mortgages Inc.
If you’re planning to buy a home in Canada and have less than a 20% down payment, you’ve likely heard the term high ratio mortgage. For many first-time buyers in Saskatoon, this is the most common path to homeownership.
In this guide, we’ll break down what a high ratio mortgage is, how it works, its pros and cons, and how working with the Top Mortgage brokers in Saskatoon can help you secure the right financing.
What Is a High Ratio Mortgage?
A high ratio mortgage is a home loan where the buyer puts down less than 20% of the property’s purchase price. Because the down payment is smaller, the mortgage is considered higher risk for lenders.
In Canada, any mortgage with a down payment under 20% must be covered by mortgage default insurance. This insurance protects the lender — not the borrower — if payments are missed.
Example:
- Home price: $500,000
- Down payment: $50,000 (10%)
- Mortgage amount: $450,000
- Since the down payment is under 20%, this is a high ratio mortgage and requires mortgage insurance.
Why Do High Ratio Mortgages Require Insurance?
Canadian lending regulations require mortgage insurance on high ratio mortgages to reduce risk for lenders. The insurance is typically provided by:
- Canada Mortgage and Housing Corporation (CMHC)
- Sagen
- Canada Guaranty
The insurance premium is calculated as a percentage of your mortgage amount and is usually added to your mortgage balance.
Minimum Down Payment Rules in Canada
Here’s how down payments generally work:
- 5% on homes up to $500,000
- 10% on the portion above $500,000 (up to $999,999)
- 20% minimum for homes priced at $1 million or more
If you’re buying in Saskatoon, many homes fall within a price range where a high ratio mortgage is common, making this option especially relevant.
Advantages of a High Ratio Mortgage
1. Buy Sooner with a Smaller Down Payment
You don’t have to wait years to save 20%. This helps first-time buyers enter the market earlier.
2. Lower Interest Rates
Insured mortgages often qualify for lower interest rates because they are less risky for lenders.
3. Competitive Lender Options
Many lenders offer attractive products for insured borrowers, especially when working with the best mortgage broker Saskatoon has available.
Disadvantages to Consider
1. Insurance Premium Cost
Mortgage insurance can add thousands of dollars to your total borrowing cost.
2. Larger Monthly Payments
Since the insurance premium is added to your mortgage balance, your monthly payments may increase.
3. Strict Qualification Guidelines
High ratio mortgages must meet stricter underwriting standards, including stress test requirements.
High Ratio vs. Conventional Mortgage
Understanding this difference is critical before making a purchase decision.
Who Should Consider a High Ratio Mortgage?
A high ratio mortgage is ideal if:
- You’re a first-time homebuyer
- You have stable income but limited savings
- You want to enter the housing market sooner
- You qualify under federal lending guidelines
Many buyers searching for the best mortgage brokers near me are often exploring high ratio options to make homeownership possible.
How Mortgage Brokers Help with High Ratio Mortgages
Navigating mortgage insurance rules, lender policies, and stress test requirements can be overwhelming. This is where working with experienced local mortgage brokers Saskatoon buyers trust becomes essential.
A knowledgeable broker can:
- Compare multiple lenders
- Find competitive insured mortgage rates
- Explain total borrowing costs clearly
- Help structure your mortgage strategically
- Guide you through CMHC approval requirements
Instead of going to just one bank, mortgage brokers provide access to multiple lending institutions.
Why Work with Vishal Monga — Akal Mortgages Inc.
When it comes to securing a high ratio mortgage in Saskatoon, experience matters. Akal Mortgages Inc. provides tailored mortgage solutions for first-time buyers and growing families.
Vishal Monga works closely with clients to:
- Assess financial readiness
- Determine affordability
- Secure competitive insured mortgage rates
- Ensure smooth mortgage approval
If you’re searching for the Top Mortgage brokers in Saskatoon, working with an experienced professional can make a significant difference in both rate and long-term savings.
Important Things to Know Before Applying
Before applying for a high ratio mortgage, make sure you:
- Check your credit score
- Calculate your total debt-to-income ratio
- Budget for closing costs
- Understand your long-term financial goals
A mortgage is not just about approval — it’s about sustainability.
Final Thoughts
A high ratio mortgage can be a powerful tool for entering the housing market without a 20% down payment. While it requires mortgage insurance and comes with additional costs, it also opens doors for many Canadians who are financially ready but still building savings.
If you’re buying in Saskatoon and want clarity on your options, consulting with one of the best mortgage broker Saskatoon professionals can simplify the process and help you make a confident decision.
Homeownership is a major milestone. The right advice, the right structure, and the right mortgage strategy can set you up for long-term success.
Comments
Post a Comment