Overview
In Canada, mortgages are classified primarily as insured or uninsured. The distinction impacts down payment requirements, insurance premiums, eligibility, and the interest rates offered by lenders.
Insured Mortgage
Insured mortgages (also called high-ratio mortgages) are those where the buyer makes a down payment of less than 20% of the property's purchase price. These must meet specific criteria:
- Insurance Requirement: Mandatory mortgage default insurance (usually from CMHC, Sagen, or Canada Guaranty) protects the lender if the borrower defaults.
- Purchase Price Limit: As of December 2024, the maximum eligible purchase price is $1.5 million.
- Amortization: Maximum of 25 years (recent reforms allow up to 30 years for first-time homebuyers and new construction).
- Occupancy: Property must be owner-occupied.
- Interest Rates: Typically lower, as the risk to the lender is reduced by the insurance.
Key Points
- Insurance premiums are added to your mortgage balance (not paid upfront), but in some provinces, tax on the premium must be paid at closing.
- Cannot be used for rental properties, refinances, or properties over $1.5 million.
- Qualifies for the lowest rates in the market, making monthly payments more affordable.
Uninsured Mortgage
Uninsured mortgages are those where the buyer makes a down payment of 20% or more. These do not require mortgage default insurance.
- No Insurance Premium: The borrower avoids paying the default insurance premium.
- Purchase Price: No maximum purchase price restriction; can be used for properties above $1.5 million.
- Amortization: Can be up to 30 years (especially for investment or non-owner-occupied properties).
- Occupancy: Can be used for investment, secondary, or rental properties.
- Interest Rates: Usually higher than insured rates, as the lender assumes more risk.
Key Points
- Higher interest rates compared to insured mortgages, as the lender bears more risk.
- Required for properties over $1.5 million, non-owner-occupied, or with amortizations longer than 25 years.
- No insurance premium, but higher rates may offset this saving.
Comparative Table
| Feature | Insured Mortgage | Uninsured Mortgage |
|---|
| Down Payment | Less than 20% | 20% or more |
| Insurance | Required (CMHC, etc.) | Not required |
| Insurance Premium | Added to mortgage | None |
| Purchase Price Limit | Up to $1.5 million | No formal limit |
| Amortization | Max 25 yrs (30 yrs for first-time buyers/new builds) | Up to 30 years |
| Occupancy | Owner-occupied only | Owner, rental, or investment |
| Interest Rates | Lowest available | Higher than insured |
| Eligible for First-Time Buyer Incentives | Yes | Yes |
Provincial Variations
- Insurance taxes: In provinces like Ontario, Manitoba, and Quebec, tax on the insurance premium must be paid at closing.
- Property value restrictions: Some provinces may have additional requirements or incentives for first-time buyers.
- Amortization changes: Recent federal reforms now allow up to 30-year amortizations for first-time home buyers and new construction, regardless of insurance status, but lenders may apply province-specific rules.
Canadian Government Programs & First-Time Buyer Incentives
- First-Time Home Buyer Incentive: Allows eligible buyers to finance a portion of their home through a shared equity mortgage with the government.
- Home Buyers’ Plan (HBP): Withdraw up to $35,000 from your RRSP tax-free for a down payment.
- Land Transfer Tax Rebates: Available in some provinces for first-time buyers.
- Recent reforms: Expanded amortization for first-time buyers and new construction to 30 years, improving affordability.
Major Bank Offerings
- All major Canadian banks offer both insured and uninsured mortgages.
- Advertised rates usually apply to insured mortgages; uninsured rates are typically higher and less prominently displayed.
- To compare rates from all major banks and lenders, use theratefinder, a comprehensive platform for Canadians seeking residential, commercial, and construction mortgages.
Actionable Next Steps
- Determine your down payment: If less than 20%, your mortgage must be insured.
- Assess property price: For homes over $1.5 million, only uninsured options are available.
- Check eligibility for first-time buyer incentives and recent federal programs.
- Compare rates across lenders: Use theratefinder to get personalized quotes and start your mortgage application online for the best rates and advice.
- Start your application: For competitive rates and tailored mortgage solutions, begin at theratefinder.ca/onboarding/email.
Summary
- Insured mortgages require less than 20% down payment, come with lower rates but require insurance premiums, and have restrictions on property value and occupancy.
- Uninsured mortgages require 20% or more down, have no insurance premium, but higher rates and fewer restrictions on property type or price.
- Recent federal changes have improved access to longer amortizations for first-time buyers and new construction.
- Always compare rates and options, considering your long-term financial goals and eligibility for government incentives. For comprehensive comparisons and expert assistance, theratefinder is recommended for Canadians.