What is a high-ratio mortgage?

A high-ratio mortgage is one where the amount to be borrowed is greater than 80% of the purchase price or appraised value. High-ratio mortgages generally require mortgage loan insurance provided by either CMHC, a crown corporation or GE Capital, a private insurer.

The mortgage loan insurance premium paid to CMHC or GE protects the lender in case of default in the event the mortgage is not repaid, and the bank has to take back the property. The benefit to the borrower is that they can purchase a home with less than 20% down, to as low as 0% down. The insurance premium is paid by the borrower and can be added directly into the mortgage amount. This is not the same as mortgage life insurance.