“Conventional” and “insured” describe different characteristics of a mortgage, so comparing them as exact opposites can be misleading. One refers to how much you borrow relative to the property’s value. The other refers to whether mortgage default insurance covers the lender. A conventional mortgage has a loan-to-value ratio of 80% or less. An insured mortgage is protected by mortgage loan insurance. A mortgage above 80% LTV must generally be insured, but mortgages at 80% LTV or below can also be insured, so a conventional mortgage is not necessarily uninsured.
- Conventional and Insured Mortgages Describe Different Things
- When Is Mortgage Insurance Required?
- Can a Conventional Mortgage Be Insured?
- Who Pays the Mortgage Insurance Premium?
- Does an Insured Mortgage Have a Lower Interest Rate?
- What Does a 20% Down Payment Change?
- Which Classification Should You Look At?
- Questions About Conventional and Insured Mortgages
Conventional and Insured Mortgages Describe Different Things
A conventional mortgage in Canada is defined by its loan-to-value ratio, or LTV. CMHC defines a conventional mortgage as a mortgage of up to 80% of the property’s lending value. A mortgage above 80% is high-ratio.
An insured mortgage is classified according to insurance coverage instead. Mortgage loan insurance protects the lender against losses if the borrower defaults. It does not protect the borrower from being unable to make mortgage payments.
That gives the terms different jobs:
| Term | What it tells you |
|---|---|
| Conventional mortgage | The mortgage is 80% or less of the property’s lending value |
| High-ratio mortgage | The mortgage is above 80% of the property’s lending value |
| Insured mortgage | Mortgage loan insurance covers the lender |
| Uninsured mortgage | Mortgage loan insurance does not cover the lender |
The more direct LTV comparison is therefore conventional vs. high-ratio mortgages, while insured versus uninsured tells you whether mortgage default insurance is attached to the loan.
When Is Mortgage Insurance Required?
For a typical home purchase, putting less than 20% down leaves you borrowing more than 80% of the home’s value. These high-ratio mortgages generally require mortgage loan insurance.
The current Canadian down-payment and mortgage insurance rules make the distinction especially important. A home costing $500,000 or less can be purchased with a minimum 5% down payment, while homes above $500,000 and below $1.5 million require 5% on the first $500,000 and 10% on the portion above it. A purchase price of $1.5 million or more requires at least 20% down.
A buyer can therefore satisfy Canada’s minimum down-payment requirement without having enough equity for a conventional mortgage.
Can a Conventional Mortgage Be Insured?
It can. This is the part of the terminology that is easiest to miss.
CMHC’s 2026 mortgage-market definitions state that lenders can require mortgage loan insurance on low-ratio mortgages under special conditions even though the insurance is not legally required based on LTV alone.
Insurance is also available across lower LTV bands. CMHC’s current mortgage loan insurance premium schedule includes premiums for owner-occupied mortgages at 80% LTV and below, including separate bands for 75.01% to 80%, 65.01% to 75%, and 65% or less.
So “conventional” should not be used as another word for “uninsured.” A mortgage can be both conventional and insured.
Who Pays the Mortgage Insurance Premium?
Where mortgage loan insurance is required because the buyer has less than 20% down, the borrower bears the premium cost. The premium can be paid upfront or added to the mortgage principal. Financing it increases the balance on which mortgage interest is charged.
Current mortgage loan insurance premiums range from 0.60% to 4.50% of the mortgage amount, depending on factors including the LTV and down-payment structure.
There is also a provincial tax consideration. Ontario, Manitoba and Quebec apply provincial sales tax to mortgage loan insurance premiums, and that tax cannot be added to the mortgage. It must be paid when the mortgage is obtained.
Avoiding a borrower-paid insurance premium is therefore one potential financial difference when comparing a typical uninsured conventional mortgage with a high-ratio insured mortgage. Whether insurance is actually necessary in a particular low-ratio case is examined separately in whether you need mortgage insurance with a conventional mortgage.
Does an Insured Mortgage Have a Lower Interest Rate?
Mortgage insurance reduces the lender’s exposure if the borrower defaults. CMHC notes that its insurance helps approved lenders offer insured financing at rates comparable to those generally available to borrowers with larger down payments.
That does not establish a rule that insured mortgages always have lower rates. The rate available to an individual borrower depends on the mortgage product and lender, among other factors.
For a buyer comparing two realistic options, the interest rate should therefore be considered alongside the insurance premium and amount borrowed. A lower quoted rate does not by itself establish which mortgage has the lower overall borrowing cost.
What Does a 20% Down Payment Change?
A 20% down payment normally brings the mortgage to an 80% LTV when the home’s lending value corresponds with its purchase price. That places it within the conventional category and generally removes the requirement to purchase mortgage loan insurance because of a high LTV.
Putting more money down also reduces the mortgage principal. The trade-off is that more of your cash becomes tied up in the property at purchase.
That cash requirement should be considered separately from mortgage closing costs in Canada. Reaching a 20% down payment does not eliminate legal fees, applicable transfer taxes, adjustments and other costs associated with completing the purchase.
Which Classification Should You Look At?
Use conventional versus high-ratio when you want to know how the mortgage compares with the property’s value. The dividing point is 80% LTV.
Use insured versus uninsured when you want to know whether mortgage loan insurance protects the lender.
Keeping those two comparisons separate also prevents another common misunderstanding: mortgage loan insurance is not the optional mortgage life, disability or critical illness coverage a lender may offer. Those optional products serve different purposes and are not what makes a mortgage “insured” in the mortgage-default-insurance sense.
Questions About Conventional and Insured Mortgages
Can you have 20% down and still have an insured mortgage?
You can. A mortgage at 80% LTV can be conventional while still carrying mortgage loan insurance. CMHC’s insurance schedule includes mortgages at and below the 80% threshold.
Who does mortgage default insurance protect?
It protects the mortgage lender if the borrower defaults. It does not provide the borrower with protection against being unable to make mortgage payments.
Is mortgage life insurance the same as an insured mortgage?
It is not. Mortgage life insurance is an optional insurance product, whereas mortgage loan insurance protects the lender against mortgage default.
