Vancouver Mortgage Broker Mark Fidgett explains High Ratio Mortgages
Banks and financial institutions are not allowed to lend against real estate mortgages unless the down payment is at least 20% of the value of the property. In order to achieve a higher level of financing, lenders need to obtain mortgage default insurance from one of three institutions in Canada – the Canadian Mortgage and Housing Corporation (CMHC), Genworth Financial (formerly GE Mortgage) and AIG United Guaranty. In the event the borrower is unable to pay the mortgage, the lender will be paid by these institutions.
AIG is not widely used due to the financial difficulties experienced by their parent company in the US.
It is the lender’s choice as to which mortgage insurance company to use. Many lenders have a preference as to which mortgage insurance company to use.
There may be cases where one mortgage insurance company is more suited to the transaction. For example, Genworth has a more flexible policies for rental suites. Genworth will accept non-conforming basement suites while CMHC will not.
The insurance premiums is computed based on the level of financing, as shown below
Loan to Value ratio
Premium
Up to 65.00%
0.50%
65.01 – 75.00%
0.65%
75.01 – 80.00%
1.00%
80.01 – 85.00%
1.75%
85.01 – 90.00%
2.00%
90.01 – 95.00%
2.75%
Note: premiums are for fixed rate or capped variable single advance mortgages. Please contact www.notapennydown.com for other types of mortgages..
The cost of mortgage default insurance is paid by the borrower and can be added on to the mortgage amount. Note that with high-ratio mortgages, CMHC, Genworth or AIG will do the appraisal so there is no appraisal fees in a high-ratio transaction.
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@OwenGreaves That same obsolete agent is a salesman instead of a consultant R/T r Real Esta Agents Becoming Obsolete? - http://bit.ly/cdboti5 hours ago
Got out of the movie theater around 8:30 and it's already dark. Times a changing. Here's to an Indian Summer : ) 5 hours ago
