What defines a high ratio mortgage?

A high-ratio mortgage is specifically defined as a loan that exceeds an 80% loan-to-value (LTV) ratio. This means that the borrower is borrowing more than 80% of the property's appraised value or purchase price, whichever is lower. As a result, the borrower is required to make a smaller down payment—less than 20%—on the home.

This type of mortgage typically requires mortgage insurance to protect the lender in the event that the borrower defaults on the loan. The insurance can be provided by entities like the Canada Mortgage and Housing Corporation (CMHC) or other private insurers, and it's standard practice in Canada for lenders to require this insurance on high-ratio mortgages.

In contrast, a loan with an LTV of under 80% represents a conventional mortgage, which does not require mortgage insurance, as the borrower is viewed as posing less risk to the lender. The minimum down payment of 20% mentioned in another choice aligns with conventional loans, but high-ratio mortgages specifically denote those surpassing the 80% threshold. Additionally, while insured mortgages apply to high-ratio loans, the key defining factor is the LTV ratio itself.