Mortgage Categories

Understanding the Three Mortgage Categories in Canada

When buying a home in Canada, most buyers focus on interest rates, down payments, and monthly payments. However, there is another important factor that many buyers are not aware of: the mortgage category.

Canadian mortgages generally fall into three categories:

1. Insured mortgages
2. Insurable mortgages
3. Uninsurable mortgages

These categories affect eligibility, interest rates, amortization limits, and financing options. Understanding the differences can help buyers make more informed decisions when financing a property.

1. Insured (High-Ratio) Mortgages:

An insured mortgage applies when the buyer makes a down payment of less than 20% of the purchase price. Because the lender assumes greater risk, the mortgage must be protected by mortgage default insurance.

In Canada, mortgage insurance is provided by three main insurers:

• Canada Mortgage and Housing Corporation (CMHC)
• Sagen
• Canada Guaranty

The insurance protects the lender, not the borrower. The cost of the insurance premium is typically added to the mortgage amount and paid over time as part of the mortgage payments.

To qualify for an insured mortgage, the property price must generally be $1.5 million or less. Buyers must also meet minimum down payment requirements:

• 5% on the first $500,000 of the purchase price
• 10% on the portion between $500,000 and $1.5 million

Insured mortgages normally have a maximum amortization of 25 years. However, 30-year amortizations may be permitted for first-time homebuyers or buyers purchasing newly built homes.

Because the mortgage is insured and therefore carries less risk for lenders, borrowers in this category often receive the lowest mortgage interest rates available.

2. Insurable Mortgages:

An insurable mortgage is a mortgage with a down payment of at least 20%, but it still meets the criteria that allow the lender to insure it in the background.

Although the borrower does not pay the insurance premium, lenders may purchase portfolio insurance after the mortgage is funded. This allows lenders to manage risk and sometimes securitize the loan.

For a mortgage to remain insurable, several conditions usually apply:

• The property value must typically be $1 million or less
• The amortization must be 25 years or less
• The property is generally owner-occupied

Because these mortgages can still be insured by the lender, they usually qualify for competitive mortgage rates, although they may be slightly higher than insured mortgage rates.

This category is very common among buyers who have saved a 20% down payment but are purchasing properties below $1 million.

3. Uninsurable Mortgages:

An uninsurable mortgage does not qualify for mortgage default insurance through CMHC or private insurers.

These mortgages are therefore fully carried by the lender, which increases their risk exposure.

Common situations where mortgages become uninsurable include:

• Homes priced above $1.5 million
• Refinancing an existing mortgage
• Rental or investment properties
• Second homes
• Amortizations longer than 25 years

Because lenders cannot insure these mortgages, the interest rates are often slightly higher than those for insured or insurable mortgages.

This category frequently applies to higher-value properties, investors, or homeowners accessing equity through refinancing.

Why Mortgage Categories Matter:

The distinction between insured, insurable, and uninsurable mortgages may seem technical, but it can have a real impact on the cost of borrowing.

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