Buying Your Home With Just 5% Down

High Ratio Mortgage - CMHC & GE Capital Insurance

What is High Ratio Financing?

Mortgage loan insurance is typically required by lenders when homebuyers make a downpayment of less than 20% of the purchase price. Mortgage loan insurance helps protects lenders against mortgage default, and enables consumers to purchase homes with little or no downpayment — with interest rates comparable to those with a 20% downpayment. High ratio mortgages must be insured through either CMHC (Canada Mortgage & Housing Corporation) or GE Capital Insurance. This insurance is paid for by the borrower and is for the lender, protecting them from the risk of the mortgage not being paid.

The insurance premium is calculated as a percentage of the mortgage amount, depending on the loan-to-value ratio, and may be added to the principal amount of the mortgage. The premiums are as follows:

*Premiums in Ontario and Quebec are subject to provincial sales tax — the sales tax cannot be added to the loan amount.

You must insure the entire loan, not just the amount that is above 75% of the purchase price. Most lenders will let you roll the insurance premium into your mortgage. If you do, though, you'll end up paying a good deal of interest on the insurance fee as well.

How Do You Qualify?

Home Requirements

• The home you plan to purchase must be your principal residence, and located in Canada.

Personal Requirements

• You will typically have a down payment of at least 5% of the purchase price of the dwelling, depending on the dwelling type.
  Single-family and two-unit dwellings (5% minimum down payment)
  Three- or four-unit dwellings (10% minimum down payment)
  
  
• Normally, the minimum down payment comes from your own resources. However, a gift of a down payment from an immediate relative is acceptable for dwellings of 1 to 4 units. For eligible borrowers, additional sources of down payment, such as lender incentives and borrowed funds, are also permitted through CMHC’s Flex Down product. Check with your lender for qualifying criteria and availability.
• CMHC Flex 100 helps borrowers who have not saved a down payment but have a proven track record of managing their debt and the financial capacity to repay the mortgage, to purchase a home.
• Your total monthly housing costs, including Principal, Interest, property Taxes, Heating (P.I.T.H.), the annual site lease in the case of leasehold tenure and 50% of applicable condominium fees, shouldn’t represent more than 32% of your gross household income (Gross Debt Service (GDS) ratio). Use the GDS form to calculate how much you can afford in housing costs to be eligible.
• Your total debt load shouldn’t be more than 40% of your gross household income. The Total Debt Service (TDS) ratio is your P.I.T.H. + the annual site lease in the case of leasehold tenure and 50% of condominium fees (if applicable) + payments on all other debt / gross annual household income. Add up your costs and determine your Total Debt Service ratio using the TDS form.
• You also need to think about closing costs (for example, legal and land transfer fees) equivalent to 1.5% to 4% of the purchase price. Many first-time buyers are surprised by these costs. That is why, when qualifying for CMHC’s Mortgage Loan Insurance, our Home Purchase Cost Estimate worksheet form will help you calculate your total homebuying costs.
• Closing costs include but are not limited to one-time items such as lawyer fees, GST and PST as applicable, land transfer tax if applicable, adjustments, etc., to allow you to complete the house purchase.
• Other requirements may apply and are subject to change. For details, please contact your lender or mortgage broker.

Once qualified the minimum initial loan term is 3 years. For more information visit the CMHC Website or call: (604) 731-5733.

Other Tricks & Tips for Successful Home Buying

Let Us Help Find the Right House for You...an easy to fill out form highlighting your "Dream Home".

Ten Steps to Buying Your Home...find out the most important steps in planning the purchase of your first home.

Getting Pre-approved for a Mortgage...find out how you can increase your bargaining power.

Saving Money on Your Mortgage...helpful suggestions to reduce the amount of interest you pay.

Closing Costs...don't forget about closing costs when you are purchasing your home.

Property Transfer Tax Exemption...you might be eligible for an exemption of up to $6,500.