High-Ratio vs Conventional Mortgages in BC: 5% or 20% Down?

• Down Payment Threshold: High-ratio mortgages require less than 20% down while conventional mortgages need 20% or more
• Insurance Requirements: High-ratio mortgages must be insured through CMHC, Sagen, or Canada Guaranty, adding 2.80% to 4.00% to your loan on homes priced under $1.5 million
• Qualification Standards: Both mortgage types face the same stress test, but conventional mortgages offer more lender flexibility

Put down less than 20% on a BC home and you need a high-ratio (insured) mortgage. Put down 20% or more and you can take a conventional mortgage with no insurance premium. The choice affects everything from your monthly payments to your total borrowing costs. According to CMHC, mortgage default insurance premiums on a high-ratio mortgage range from 2.80% to 4.00% of the mortgage amount, making this one of the most financially significant decisions in your home buying journey. In Metro Vancouver's housing market, understanding these mortgage types can save you thousands or help you enter the market sooner. The right choice depends on your savings, your timeline, your long-term goals and the price of the home you want.

High-ratio mortgages win for accessibility while conventional mortgages win for long-term cost savings. The exception is when you're buying an investment property, where high-ratio financing isn't available. Here's how these mortgage types stack up across key dimensions:

• Best for: High-ratio suits first-time buyers with limited savings. Conventional suits established buyers focused on lower total cost.
• Down payment: High-ratio is 5% to 19.99%. Conventional is 20% or more.
• Insurance: High-ratio requires a one-time premium of 2.80% to 4.00%. Conventional requires none.
• Maximum purchase price: High-ratio is available under $1.5 million. Conventional has no limit.
• Lender options: High-ratio works with all major lenders. Conventional adds private and alternative lenders.
• Maximum amortization: High-ratio is 25 years, or 30 years for first-time buyers and buyers of new builds. Conventional is set by each lender.
• Investment properties: Not available with high-ratio. Available with conventional.
• Verdict: High-ratio is best for market entry. Conventional is best for total savings.

For a buyer looking at a Burke Mountain townhouse, high-ratio financing can mean buying sooner rather than waiting years to save a full 20% down payment. According to the Financial Consumer Agency of Canada, both mortgage types face the same stress test requirements, qualifying at the greater of your contract rate plus 2% or 5.25%. A mortgage pre-approval shows what you qualify for under that test before you start shopping. The key difference lies in the upfront costs and long-term financial impact. You can compare both scenarios with my BC down payment calculator.

Conventional mortgages win decisively on total cost, but high-ratio mortgages often make financial sense despite the insurance premium. Here's how the numbers compare on an example purchase.

Consider a $800,000 home purchase in Port Moody. With a conventional mortgage at 20% down ($160,000), you avoid insurance premiums entirely. Your mortgage amount is $640,000. With a high-ratio mortgage at 10% down ($80,000), your mortgage amount jumps to $720,000 plus a CMHC premium of 3.10% ($22,320), for a total loan of $742,320. That's $102,320 more borrowed than with the conventional option, and you pay interest on the premium and the extra principal for the life of the mortgage. The other side of the ledger is time. If saving the additional $80,000 for a conventional down payment would take you years, you keep paying rent in the meantime, and prices can move in either direction while you wait. Weigh the premium against what waiting would realistically cost you.

Choose high-ratio financing if you're a first-time buyer with limited savings or buying in an appreciating market where timing matters more than cost optimization. The decision often comes down to opportunity cost versus total cost.

First-time buyers with 5-15% saved: High-ratio mortgages let you enter the market immediately rather than rent for years while saving more. Every month you keep renting is a month of payments that build no equity. According to the CRA, the FHSA allows $8,000 per year up to a $40,000 lifetime limit, and FHSA savings can go toward your down payment. Our guide to BC first-time buyer programs covers the FHSA, the RRSP Home Buyers' Plan and the property transfer tax exemption.

Established buyers with 20%+ available: Conventional mortgages make sense when you have sufficient down payment funds without draining your emergency reserves or the cash you need for closing costs beyond the down payment. You'll avoid the insurance premium entirely, but insured mortgages often carry slightly lower interest rates than uninsured ones, so compare the total cost rather than the rate alone.

Investors and second-home buyers: You must choose conventional financing since high-ratio mortgages aren't available for investment properties. This is where I recommend exploring our investment property financing options, including alternative lenders who specialize in rental property purchases.

Here's an edge case to watch: according to CMHC, mortgage loan insurance is not available on a home priced at $1.5 million or more, regardless of your down payment percentage. In Maillardville or Burquitlam, where some detached homes exceed this threshold, you'll need conventional financing with at least 20% down.

Frequently Asked Questions

Can I switch from high-ratio to conventional mortgage at renewal?

Yes, if your home value has increased enough that you now owe less than 80% of its current value, you can move to conventional financing at renewal or through a refinance. Keep in mind the CMHC premium was a one-time charge added to your balance, so there is nothing ongoing to cancel, and insured mortgages often qualify for the lowest rates. The real benefit of reaching 20% equity is more lender choice and the ability to refinance.

Do credit unions in BC require CMHC insurance for high-ratio mortgages?

Generally, yes. Credit unions in BC are regulated provincially by the BC Financial Services Authority (BCFSA) rather than by the federal banking regulator, but their high-ratio mortgages are typically insured through the same insurers the banks use: CMHC, Sagen or Canada Guaranty. Lending policies vary from one credit union to the next, so qualification criteria can differ from the big banks.

What happens to my CMHC insurance if I sell my BC home early?

If you pay off the mortgage when you sell, the insurance ends with it. If you port your mortgage to your next home, the insurance can usually move with it, and the insurers offer portability credits so you may pay little or no new premium on the ported amount.

What is a high-ratio mortgage in Canada?

A high-ratio mortgage is any home loan where the buyer's down payment is less than 20% of the purchase price. In Canada, high-ratio mortgages must be insured through CMHC, Sagen, or Canada Guaranty. The insurance protects the lender in case of default, and the borrower pays the premium. Since December 15, 2024, high-ratio mortgages are available on homes priced under $1.5 million. Insured mortgages have a maximum 25-year amortization, but since that date first-time buyers and buyers of newly built homes can choose 30 years, according to the Department of Finance. You count as a first-time buyer if you have never bought a home, have not lived in a home that you or your current spouse or partner owned in the last four years, or have recently been through the breakdown of a marriage or common-law partnership.

What is the minimum down payment for a high-ratio mortgage in BC?

The minimum down payment is 5% on homes priced up to $500,000. For homes between $500,000 and $1,499,999, you need 5% on the first $500,000 and 10% on the portion above. On a $700,000 home in Coquitlam, that works out to a total minimum of $45,000 down ($25,000 on the first $500K plus $20,000 on the remaining $200K). Homes at $1.5 million or more require at least 20% down and are not eligible for high-ratio mortgage insurance.

How much does CMHC mortgage insurance cost on a high-ratio mortgage?

CMHC premiums range from 4.00% (with 5% to 9.99% down) to 3.10% (10% to 14.99% down) and 2.80% (15% to 19.99% down) of the mortgage amount, added to your loan balance rather than paid in cash upfront. First-time buyers and new build buyers who choose a 30-year amortization pay an extra 0.20%, because CMHC applies a surcharge to any amortization beyond 25 years. On a $600,000 home with the minimum $35,000 down, the insured mortgage is $565,000 and the 4.00% premium adds $22,600 to your total loan. Unlike Ontario, Quebec and Saskatchewan, BC does not charge sales tax on the premium.

Can I switch from a high-ratio mortgage to a conventional mortgage later?

Yes. Once your mortgage balance drops below 80% of your home's current market value, through principal repayment, appreciation, or both, you can move to conventional (uninsured) financing. How long that takes depends on your payments and on local property values, which can fall as well as rise. At that point your lender options broaden significantly, including the ability to refinance and access equity.

The choice between high-ratio and conventional mortgages really comes down to your down payment situation and long-term goals. If you're putting down less than 20%, you'll automatically be in high-ratio territory with mortgage insurance premiums, but that's not necessarily a bad thing: it can get you into homeownership years sooner. Once your payments, and any rise in your home's value, bring your balance below 80% of the home's value, more lender and refinancing options open up. The key is understanding the true cost of mortgage insurance and factoring that into your monthly budget planning.

Every situation in the Tri-Cities market is different, and I'm happy to run the numbers on both scenarios for your specific circumstances. For a townhouse in Westwood Plateau or a condo in Town Centre, I can show you exactly how high-ratio versus conventional financing would work for your budget and timeline as part of my home purchase mortgage service. My services are free to borrowers because the lender pays at closing, and I have access to 90+ lenders, including banks, credit unions, alternative and private lenders. I serve the Tri-Cities and Metro Vancouver, and if you'd like to compare both options for your purchase, book a no-pressure consultation.