The difference between a conventional and high-ratio mortgage comes down primarily to how much of the property’s value you borrow. The dividing line is a loan-to-value ratio of 80%. A conventional mortgage is no more than 80% of the property’s lending value, while a high-ratio mortgage is above 80%. For a typical home purchase, that generally means a conventional mortgage has at least a 20% down payment, while a high-ratio mortgage has less than 20% down and normally requires mortgage loan insurance.
- Conventional vs. High-Ratio Mortgage at a Glance
- The Down Payment Creates the Main Difference
- Mortgage Insurance Is the Biggest Cost Difference
- Their Amortization Options Can Differ
- A High-Ratio Mortgage Does Not Necessarily Have a Higher Interest Rate
- Both Can Still Be Fixed, Variable, Open or Closed
- Which Difference Matters Most When You Are Buying?
- Questions About Conventional and High-Ratio Mortgages
Conventional vs. High-Ratio Mortgage at a Glance
| Feature | Conventional mortgage | High-ratio mortgage |
|---|---|---|
| Loan-to-value ratio | 80% or less | More than 80% |
| Typical down payment | 20% or more | Less than 20% |
| Mortgage loan insurance | Generally not mandatory | Typically required |
| Insurance premium | Usually avoided | Normally applies |
| Maximum amortization | Set by lender when down payment exceeds 20% | Generally 25 years, or up to 30 years for eligible borrowers |
The 80% dividing line comes directly from the definitions used for conventional and high-ratio mortgages.
The Down Payment Creates the Main Difference
Consider a $500,000 home. A $100,000 down payment leaves a $400,000 mortgage, giving you an 80% loan-to-value ratio. That falls within the conventional mortgage definition.
Put $50,000 down instead and you need a $450,000 mortgage before any mortgage insurance premium is added. You are financing 90% of the purchase price, making the mortgage high-ratio.
Canada does allow eligible buyers to purchase some homes with substantially less than 20% down. Under the current minimum down payment rules in Canada, a home costing $500,000 or less requires at least 5%. For homes above $500,000 but below $1.5 million, the minimum is 5% of the first $500,000 and 10% of the portion above that amount. Homes priced at $1.5 million or more require at least 20%.
Those are minimum purchase requirements, not the definition of a conventional mortgage. Reaching the minimum down payment can make the purchase possible, while reaching 20% generally determines whether the mortgage falls on the conventional side of the 80% LTV threshold. The mechanics of the higher-down-payment option are covered separately in what a conventional mortgage is in Canada.
Mortgage Insurance Is the Biggest Cost Difference
A high-ratio mortgage normally requires mortgage loan insurance. This insurance protects the lender against losses if the borrower defaults. It does not reimburse the borrower for missed mortgage payments.
The borrower ultimately bears the insurance premium. With CMHC coverage, current standard premiums for owner-occupied properties range from 0.60% to 4.00% of the loan amount across the standard LTV bands, with a 4.50% rate applying to certain 90.01% to 95% loans using a non-traditional down payment. CMHC’s current mortgage insurance premium schedule shows how the percentage changes with the LTV ratio.
The premium can be paid upfront or added to the mortgage. Financing it means interest is also charged on the premium because it becomes part of the mortgage balance.
A conventional mortgage generally avoids mandatory mortgage loan insurance, but 20% down does not guarantee that insurance will never be required. A lender can still require it in some circumstances. The circumstances surrounding that exception are examined more closely in whether you need mortgage insurance with a conventional mortgage.
Their Amortization Options Can Differ
The down-payment distinction can also affect how long you are permitted to amortize the mortgage.
When the down payment is less than 20%, the maximum amortization is generally 25 years. A maximum of 30 years is available when the borrower is a first-time homebuyer and/or is purchasing a new build.
When the down payment exceeds 20%, the lender determines the maximum amortization it is willing to offer. The federal explanation of mortgage terms and amortization also notes that extending an amortization usually reduces regular payments but increases total interest costs because repayment takes longer.
This does not mean every conventional borrower will receive or should choose a longer amortization. It means the insured-mortgage limits do not determine the maximum in the same way once the down payment is above 20%.
A High-Ratio Mortgage Does Not Necessarily Have a Higher Interest Rate
It would be easy to assume that borrowing a larger percentage of the home’s value automatically produces a higher mortgage rate. Mortgage pricing is not that simple.
Mortgage loan insurance reduces the lender’s exposure to losses if the borrower defaults. Consequently, an insured high-ratio mortgage can sometimes be offered at a competitive rate even though the borrower starts with less equity.
A conventional mortgage avoids the mandatory insurance premium but does not automatically receive the lowest interest rate. The rate offered can also depend on the lender, mortgage term, fixed or variable structure, available discounts and borrower characteristics.
Compare the actual rate and total borrowing costs rather than choosing between conventional and high-ratio financing based on an assumed rate advantage.
Both Can Still Be Fixed, Variable, Open or Closed
Neither classification determines how the interest rate behaves or how restrictive the mortgage is.
A conventional mortgage can be fixed or variable, and it can be open or closed. The same distinctions can apply to a high-ratio mortgage subject to the products and insurance requirements available from the lender.
That is because conventional versus high-ratio describes the LTV position. Fixed versus variable describes the interest-rate structure, while open versus closed describes prepayment flexibility. Keeping those classifications separate prevents the terminology from becoming more complicated than it needs to be.
Which Difference Matters Most When You Are Buying?
The practical trade-off starts with cash.
Reaching 20% down reduces the mortgage principal and generally avoids the mandatory mortgage loan insurance premium. Staying below 20% lets an eligible buyer purchase with less money upfront, but produces a larger mortgage and normally introduces the insurance premium.
Do not use every available dollar solely to cross the 20% threshold without considering the rest of the purchase. Your cash budget may also need to cover mortgage closing costs in Canada, moving expenses and money you want to retain after taking possession.
The useful comparison is therefore broader than 10% down versus 20% down. Calculate how much you would borrow under each realistic option, whether an insurance premium applies, and how much cash remains after the purchase. That shows what the conventional or high-ratio distinction actually changes in your situation.
Questions About Conventional and High-Ratio Mortgages
Is 20% down considered conventional or high-ratio?
A mortgage of up to 80% of the property’s lending value is conventional. A 20% down payment on a purchase where the purchase price corresponds with the lending value normally leaves an 80% LTV mortgage.
Can you put more than 20% down on a conventional mortgage?
You can. The 20% figure represents the usual threshold for reaching an 80% LTV on a purchase, not a maximum down payment. Putting more down reduces the amount that needs to be financed.
Is a high-ratio mortgage the same as an insured mortgage?
High-ratio mortgages typically require mortgage loan insurance, but the terms are not perfect synonyms. High-ratio describes an LTV above 80%, while insured describes the presence of mortgage loan insurance. Lenders may obtain insurance on some lower-LTV mortgages as well.
