A High-Ratio mortgage is one where the amount to be borrowed by way of a mortgage is greater than 75% of the purchase price, or the appraised value, whichever is less. High-Ratio mortgages generally require Mortgage Loan Insurance provided by either Canada Mortgage and Housing Corporation (CMHC) or Genworth (GE), a private Insurer.
The Mortgage Loan Insurance premium is paid to CMHC or Genworth (Ge) and protects the Lender in the event the mortgage is not repaid and the bank has to take back the property. The benefit to the borrower is that it allows them to purchase a home with less than 25% down payment. The insurance premium is paid by the borrower and can be added directly onto the mortgage.
Mortgage Loan Insurance premiums range from .50% to 2.75% of the mortgage amount and are calculated based on the overall loan to value. For instance, borrowers with a 5% down payment, a loan to value of 95%, would pay a premium of 2.75% while those with a 20% down payment, a loan to value of 80%, would pay an insurance premium of 1.25%
Many people get Mortgage Loan Insurance confused with Mortgage Life Insurance which is not the same.
